Weakening demand was mainly behind the build-up of stocks of finished goods by industrial firms in the euro area. The latest survey of industrial activity suggests that the economic bloc could fall into recession in the near future.
PMI value is falling
The Purchasing Managers’ Index (PMI) in the euro area fell below 50 points to 49.8 in July. In June, it was just above the 52-point mark. This is according to a survey of sentiment among industrial firms conducted by S&P. The PMI value in the euro area has thus reached its lowest level since June 2020, when it reached 49.6 points.
The risk of economic recession is increasing
If the PMI falls below 50 points, it indicates a decline in industrial activity, while a value above 50 points indicates an increase. “Industrial activity in the euro area is declining, and at a relatively strong pace. This increases the risk of an economic recession in the region. New orders are declining at a pace that is the fastest since 2012, excluding the impact of the lockdown due to the coronavirus pandemic,” Chris Williamson, chief economist at S&P Global, told Reuters.
