Eurozone Manufacturing Trouble Deepens

June 3, 2019 by Douglas A. McIntyre

In a sign that Europe has been bitten by trade tensions and a slowing of the economy in several nations, new data shows that its manufacturing sector continues to shrink.

New data from research firm Markit shows:

The eurozone’s manufacturing economy remained entrenched inside contraction territory during May. After accounting for seasonal factors, the IHS Markit Eurozone Manufacturing PMI® posted below the crucial 50.0 no-change mark for a fourth successive month, recording a level of 47.7 (unchanged from the earlier flash reading). That was slightly down on the previous month’s 47.9 and close to March’s near six-year low.

The trouble was particularly acute in Germany, the region’s largest economy:

By nation, Germany continued to endure the sharpest deterioration in manufacturing operating conditions, with its respective PMI again signalling a marked rate of contraction.

As a matter of fact, the German economy is so large that its gravity is bound to put down activity in other European nations.

The slowdown in manufacturing in Europe mostly precedes the effects of a trade war, which means more and large contraction is likely in the future. That means Europe could move into recession within the next two quarters. The Organisation for Economic Co-operation and Development (OECD) and International Monetary Fund (IMF) already have expressed anxiety about this possibility.

The eurozone is a large enough trading partner with China and the United States that a domino effect is likely and already may have begun.