Eurozone July manufacturing reflects further divergence

Economic divergence between eurozone countries continued to widen in the month of July, the latest eurozone manufacturing PMI data suggest.

While the Greek PMI slumped to an all-time low, average eurozone manufacturing sector growth remained steady, at 52.4, matching the record levels reported in June, dropping to 30 basis points and well below the neutral 50 basis points mark.

According to Markit, record contractions were registered for almost all variables monitored in Grece including output, new orders, employment and stocks. The decline in July was lead by the capital goods sector, with the production of consumer and intermediary goods also deteriorating.

Phil Smith, economist at Markit said: ““Although manufacturing represents only a small proportion of Greece’s total productive output, the sheer magnitude of the downturn sends a worrying signal for the health of the economy as a whole.”

Meanwhile, the remainer of the eurozone showed gradual improvement, with growth in the Netherlands, Italy, Spain, Austria and Germany offsetting the Greek slump. According to Markit, output was spurred higher by improved inflows of new business from domestic and export clients, despite the rates of increase in total new orders and new export business easing to the slowest since April and January respectively.

A number of producers stated that cost pressures for input prices increased due to the devaluation of the euro, however, selling price inflation remained muted, with only a slight increase in charges reported.

Chris Williamson, chief economist at Markit said: “The eurozone manufacturing economy showed encouraging resilience in the face of the Greek debt crisis in July. The PMI held close to its June level, which had been the highest for over a year, coming in ahead of the earlier flash estimate largely on the back of stronger than previously recorded growth in Germany.

“Despite holding up well on prior months, the overall rate of growth in the region as a whole remains only modest, pointing to industrial production growing at an annualised rate of around 2%. France slipped back into contraction – the only country besides Greece to see worsening business conditions in July – and lacklustre growth in Germany continues to act as a brake on the overall region” he added.

Mona Dohle
Mona Dohle speaks German and Dutch, she is DACH & Benelux Correspondent for InvestmentEurope. Prior to that, she worked as a journalist in Egypt and Palestine. She started her career as a journalist working for a local German newspaper. Mona graduated with an MSc in Development Studies from SOAS and has completed the CISI Certificate in International Wealth and Investment Management.

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