Eurozone growth slows sharply to 16-month low in June: S&P Global

Companies also scaled back their business expectations for output over the coming year to the lowest since October 2020. Both the stagnation of demand and worsening outlook were widely blamed on the rising cost of living, tighter financial conditions and concerns over energy and supply chains linked to the Ukraine war and ongoing pandemic disruptions, S&P Global said in a press release.

Price pressures, meanwhile, remained elevated at levels not seen prior to the pandemic, though a moderation of cost growth for a third successive month hinted at a peaking in the rate of inflation.

The seasonally adjusted S&P Global Eurozone PMI composite output index fell from 54.8 in May to 51.9 in June. While the latest reading indicates an expansion of business activity for the sixteenth straight month, the rate of growth has moderated for two consecutive months to its lowest in the current sequence of expansion.

New orders for goods and services meanwhile stagnated, failing to rise for the first time since the recovery of demand began in March 2021. Manufacturing led the deterioration, with output falling for the first time in two years.

Although only modest in June, the rate of decline of factory output looks set to accelerate in July given a steepening loss of new orders received during the month. New orders for goods have now fallen for two consecutive months, with June seeing the sharpest decline since May 2020.

Growth, meanwhile, slowed sharply in the service sector, down to its lowest since January to signal a marked deterioration of performance of the sector over the past two months. Inflows of new business in the service sector likewise rose at a much softer pace, with growth down to the second-lowest since the revival of demand began in May 2021.

Factory output continued to be constrained by widespread supply shortages, often linked to the Ukraine war and China’s lockdowns, but the overall incidence of delays continued to moderate. Average suppliers’ delivery times consequently lengthened to the least extent since December 2020.

However, this easing of supply delays could be in part traced to lower demand for inputs, which stalled in June, contrasting with surging growth seen throughout much of the past two years, in turn linked to the largest build-up of unsold warehouse inventories for over two years.

Business expectations for the year ahead fell to the lowest since October 2020. Manufacturing expectations worsened especially markedly, down to the lowest since May 2020, but future expectations also fell in the service sector to the lowest since October 2020.

The gloomier outlook reflected various factors, including headwinds from the rising cost of living, concerns over energy and food supply amid the Ukraine war, tightening financial conditions, ongoing supply chain shortages, often linked to China’s lockdowns, and a broader diminishing of economic growth prospects, S&P Global said.

The average charges for goods and services rose sharply again in June. Although the rate of inflation eased further from April’s all-time high to the lowest since February, it remained significantly higher than anything seen prior to the pandemic over the survey’s 25-year history.

Companies again reported upward cost pressures from energy prices, transportation, broad supplier-driven price hikes and rising wage pressures. There was a divergence by sector, however, with manufacturing reporting the weakest input cost rise since March 2021 while the service sector saw the rate of increase accelerate to the steepest since April, in part reflecting the pass-through of prior raw material and energy cost increases to wages.

Fibre2Fashion News Desk (DS)