Euro area manufacturing activity dwindles amid recession risks

By Tuba Sahin

ANKARA (AA) - Euro area manufacturing activity fell into a deeper contraction in July amid recession risks, according to final Purchasing Managers’ Index (PMI) data released on Monday.

Manufacturing PMI in the single currency zone decreased to 49.8 in July from 52.1 in June, according to a report by US-based financial services company S&P Global.

Falling below the neutral level of 50, the figure marked the first deterioration in overall manufacturing sector conditions in just over two years.

The downturn strengthened amid a reduction in new orders which, aside from those seen during the pandemic restrictions, was the sharpest since the eurozone sovereign debt crisis in 2012 as steep inflation squeezed demand, the report said.

Despite a slowdown in inflation rates in July, the year-ahead outlook for manufacturing output dipped into pessimistic territory for the first time since May 2020 due to concerns over supply chains, the war in Ukraine and the economy.

Euro area manufacturing output dropped for the second consecutive month in July, the sharpest since the early stages of the pandemic in May 2020 amid supply shortages and a lack of staff.

“Eurozone manufacturing is sinking into an increasingly steep downturn, adding to the region’s recession risks,” said Chris Williamson, the chief business economist at S&P Global Market Intelligence.

“The energy crisis adds to the risks that not only will weaker demand and destocking cause manufacturing production to decline at an increased rate in the coming months, but reduced energy supply will act as an additional drag on the sector,” he added.