rise interest rates It hurts companies in the eurozone. As demand falls, financing costs become more expensive, causing companies to operate less.
The PMI (Purchasing Managers Index) activity index predicts that EMU business activity contracted faster in August as the economic slowdown continued to spread from manufacturing to services. But in addition to this, the PMI indicator from the survey of 5,000 purchasing managers in the Eurozone brings bad omens: Third consecutive drop in new order book for both sectors, biggest drop since November 2020. Excluding the pandemic months, the fall in new orders so far in August was the most intense since October 2012 (the eurozone’s GDP fell 0.8% that year), according to the report by S&P Global. Wednesday.
“New product orders continued to fall” One of the highest rates since the global financial crisisThe report underlines this. Added to this is the deterioration in service demand for the second month in a row: “This contracted in August at a rate not observed since May 2013, despite the quarantine months due to Covid. 19”, the S&P Global report states.
Major indicator
Monitoring the order book, valuable leading indicator It’s about the future development of the economy. The PMI indicator was created from surveys of executives from more than 5,000 companies in the service and manufacturing sectors in Germany, France, Italy, Spain, the Netherlands, Austria, Ireland and Greece.
Statistical data for the last quarter already show a slowdown in business activity in Spain and Europe. Data in the order book now predicts that the slowdown will continue in the coming months. “Analysis of PMI figures in our real-time GDP forecast leads us to the following conclusion: Eurozone to contract by 0.2% in the third quarter‘, sums up Cyrus de la Rubia, chief economist of the Hamburg Commercial Bank.
The drop in the order book is related to the recession that executives foresee in hiring in the coming months. It also has to do with weakening of business confidence. In line with the decrease in production needs, industrial companies continued to reduce their input purchases “intensively” in August, while final product stocks decreased.
“Europe’s Sick Germany”
Much of the downward pressure on the Eurozone economy in August came from German industrial and service companies, which suffered a greater deterioration than in France. “This evolution will only reinforce the idea that Germany is the sick person of the European economy,” de la Rubia summarizes.
Prospects are not very bright in Spain either. The industrial climate survey for July shows that pessimism is rising among businessmen, with increasingly negative values in order book indicators and production and employment prospects. According to the results of this survey; Existing order book ensures production for the next 4.8 months (0.3 less than the previous quarter, remaining similar to levels observed since 2019). Most of those surveyed state that the main factor limiting their production is the lack of demand.
In general, the industrial climate indicator for the last three months, 9.6 points negative index (out of 100) in Spain In any case, this is slightly less pessimistic than in Germany (-13.3 points) or France (10.7 points) from the same indicator, but compared to Italy (-6.1%) or the Netherlands (-3 ,2 points) weaker than the corresponding indicator. ).
Source: Informacion
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