Eurozone factory activity remains strained in August ’24

Eurozone manufacturing remained under significant strain in August. The HCOB Eurozone Manufacturing PMI, a measure of the overall health of eurozone factories compiled by S&P Global, registered 45.8 in August, unchanged from June and July.

This signals a continued sharp downturn in factory conditions across the region, with the index remaining below 50.0 since July 2022.

Factory output contracted across most eurozone nations, with Germany and France particularly impacting overall performance.

The decline in new orders was the steepest of 2024 so far, contributing to reductions in input purchasing, employment, and inventories. Business confidence also fell to a five-month low.

The decrease in sales led to a quicker drop in outstanding business volumes, with the fastest rate since February. Employment levels continued to fall, marking 15 consecutive months of job cuts.

Despite these challenges, input costs rose for the third consecutive month, though at a slightly slower pace than in July. For the first time since April 2023, prices charged by manufacturers increased, though the rise was modest.

The contraction in new orders included a notable decline in export business, which saw its sharpest drop in eight months. Among surveyed countries, only Greece, Spain, and Ireland reported growth, with Greece showing the strongest performance.

Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, highlighted the ongoing difficulties, noting that while input prices are rising and some costs are being passed on to customers, the broader trend remains negative for the sector.

““Things are going downhill, and fast. The manufacturing sector has been stuck in a rut, with business conditions worsening at the same solid pace for three straight months, pushing the recession to a gruelling 26 months and counting. New orders, both domestic and international, are slowing down even more, dashing any short-term hopes for a rebound. Adding insult to injury, input prices have been creeping up again since June. There is a silver lining insofar as companies managed to pass some of these higher costs onto their customers in August.”