OPINION
Market Rating Before FOMC MeetingJan 31
Economic Activity in Euro Area Continues to Lose Momentum
According to the results of the study conducted in cooperation with S&P Global and IHS Markit, services purchasing managers index (PMI) in Euro Area decreased by 5.84 percent to 53.0 in June. During this period, manufacturing purchasing managers' index (PMI) was also announced at 52.1 points, down 4.10 percent compared to the previous month. Composite PMI, on the other hand, was 52.0 points.
The report published by Markit Economics indicated that the pace of expansion in manufacturing activity in the Euro Area has decreased due to slowdown in production and new orders. In addition to the weakening of business conditions in the sectors, the report noted that the energy and food supply caused significant concerns about the inflation outlook, while price pressures spread throughout the area.
Inventories increased due to lower-than-expected production and sales volumes, while the accumulation of inventories may put additional pressure on the sector in the coming months, according to the report. It also noted that the manufacturing sector is more likely to enter a recession due to the weakening of demand in the recent period, but this is expected to ease in the third quarter of 2022.
On the other hand, the growth rate in the service sector was slowing down and the largest decrease was observed in factory orders, especially since the coronavirus lockdowns implemented in May 2020. In addition, leading firms of the area are increasing their business accumulation and providing employment at a sharp pace, while employers are struggling with price pressures.
The fluctuation in the commodity market led to further increase in input costs and with the rise of supply chain disruptions and the recent increase in price pressures, service sector was affected badly. Last but not least, the report pointed out that international demand conditions were weakening, the decline in exports was at the highest level in the last two years, and the demand conditions and a sharp slowdown were clearly reflected on business confidence negatively.
The report published by Markit Economics indicated that the pace of expansion in manufacturing activity in the Euro Area has decreased due to slowdown in production and new orders. In addition to the weakening of business conditions in the sectors, the report noted that the energy and food supply caused significant concerns about the inflation outlook, while price pressures spread throughout the area.
Inventories increased due to lower-than-expected production and sales volumes, while the accumulation of inventories may put additional pressure on the sector in the coming months, according to the report. It also noted that the manufacturing sector is more likely to enter a recession due to the weakening of demand in the recent period, but this is expected to ease in the third quarter of 2022.
On the other hand, the growth rate in the service sector was slowing down and the largest decrease was observed in factory orders, especially since the coronavirus lockdowns implemented in May 2020. In addition, leading firms of the area are increasing their business accumulation and providing employment at a sharp pace, while employers are struggling with price pressures.
The fluctuation in the commodity market led to further increase in input costs and with the rise of supply chain disruptions and the recent increase in price pressures, service sector was affected badly. Last but not least, the report pointed out that international demand conditions were weakening, the decline in exports was at the highest level in the last two years, and the demand conditions and a sharp slowdown were clearly reflected on business confidence negatively.
