The eurozone's economic recovery is facing a slowdown as the pace of economic growth in the region cools and inflation continues to slow. According to the flash PMI survey data for June, there has been a surprise cooling in the pace of economic growth in the eurozone, with manufacturing deteriorating at a steepening rate. France saw output fall for a second consecutive month, while Germany's growth slowed sharply from the previous month. However, the rest of the eurozone reported output growth for a sixth successive month, although at a slower rate. Manufacturing output slumped, with new orders falling for a twenty-sixth consecutive month. On the other hand, the service sector sustained its expansion, but at a slower rate. Employment increased across the eurozone, but the rise was the smallest recorded for three months. Average prices charged for goods and services rose at the slowest rate for eight months, with input costs in the service sector rising at the slowest rate since April 2021. Input costs in manufacturing rose for the first time in 16 months, resulting in the smallest decline in manufacturing selling prices seen for just over a year. Price growth in France was weak, while Germany saw a marginal increase [8561672e].
The decline in new orders reported by French businesses in June has contributed to the slowdown in the eurozone's economic recovery. This decline in orders pushed the composite Purchasing Managers Index for the eurozone to fall to 50.8 from 52.2 in May, indicating that France might not contribute as much to the eurozone's growth in the second quarter. The uncertainty surrounding the outcome of surprise legislative elections in France has led some businesses to hold back on new orders. In contrast, Germany's economy continued to expand, although its manufacturing sector was hit by weak global demand. The European Central Bank (ECB) may be concerned about signs that the eurozone's recovery is losing steam. Inflation pressures eased, and business activity also slowed in the UK, Japan, and Australia due to political uncertainty. However, India's activity gained momentum in June. Overall, the global economy experienced a slowdown in business activity in response to political uncertainty [eaf6a7e1].
June flash PMI survey data showed the G4 major developed economies expanding for a seventh successive month in June. The US saw strong economic growth, while Europe and Japan experienced slowdowns, with varying factors contributing to the divergences. The UK and eurozone PMIs fell to seven-month and three-month lows respectively, though still registered growth. The PMI for Japan sank to a six-month low, signaling stagnation. The US had the slowest rate of average price inflation for goods and services in five months. The UK had the steepest rate of selling price inflation for four months, attributed to supply chain delays. The UK's underlying price pressures remain the most worryingly elevated of the G4 [c36553f5].
The report from Bloomberg highlights the importance of consumer confidence for the eurozone's economic rebound. While the region has exited recession and experienced stronger-than-expected economic growth, weak domestic demand in Germany and Italy remains a concern. However, the services sector in the eurozone is showing positive signs, indicating the potential for sustained momentum. The report also emphasizes the role of private consumption in Spain and Germany in driving the region's recovery. The European Central Bank has consistently overestimated the pickup in private consumption, and understanding consumer behavior remains a key focus for the ECB [7b72f07a].