FRANKFURT — Economic growth in the euro zone has deteriorated sharply as business expectations point to risks of an imminent slowdown, a leading survey of businesses in the region suggested on Thursday.
The so-called composite PMI fell to 51.9 points in June from 54.8 points, marking a 16-month low as manufacturing output contracted for the first time in two years and service sector growth s being considerably slowed down. It is now just a shade above 50 points, the threshold marking economic expansion.
The slowdown signals a GDP growth rate of just 0.2% at the end of the second quarter, down sharply from 0.6% at the end of the first quarter.
“Eurozone economic growth is showing signs of flagging as the tailwind of pent-up demand from the pandemic is already fading, having been offset by the cost-of-living shock and collapsing confidence. businesses and consumers,” said Chris Williamson, economist at S&P Global Markets. Intelligence, which compiles the survey.
The second half is shaping up to be even less encouraging, as companies have reduced their business expectations for production in the coming year to the lowest since October 2020.
“Business confidence has fallen sharply to a level not seen pre-pandemic since the region’s economic contraction in 2012, suggesting an impending slowdown unless demand picks up,” Williamson warned.
The PMI is based on a survey of 5,000 companies and is considered one of the most reliable leading indicators of economic growth.
The results “mark a significant break from recent PMI readings which had shown some initial resistance to the many headwinds clouding the euro zone’s economic outlook,” said Ricardo Amaro, an economist at Oxford Economics. based slowdown.
Economists from Commerzbank and ING said the data indicates the European Central Bank needs to tread carefully when raising interest rates.