- Final manufacturing PMI 51.4 vs 51.3 prelim
- Prior 51.6
The overall euro area manufacturing sector still posted growth in June but activity declined to a four-month low. That comes despite a marginal improvement in demand conditions, with output picking up slightly alongside new orders. That being said, export demand remains a drag as it drops for a second month running.
The big problem? Supply chain issues and higher prices, even if the latter is seen dropping off from the highs. S&P Global notes that:
"Supply conditions remained a challenge, however, with the Suppliers' Delivery Times Index still well below the level seen immediately prior to the outbreak of war in the Middle East.
June signalled that vendor capacity remained stretched. That said, there were some signs of alleviating pressures as the respective sub-index rose to a three-month high. It did, however, remain well below the level seen prior to the outbreak of the Middle East war.
Nevertheless, eurozone manufacturers were able to keep on top of workloads. In fact, they even managed to make inroads into their backlogged orders in June for a second straight month.
A notable finding in the latest PMI survey data was regarding prices. The rate of input cost inflation, albeit still elevated, declined in June and was its softest since March. This followed on from a sustained upward climb in the underlying sub-index that goes as far back as September last year. As for their own price-setting, eurozone manufacturers were less aggressive. The rate of output charge inflation eased to a three-month low."
Overall, this should afford the ECB some added flexibility in waiting out the summer before deciding on the next course of policy action.
