• Prior 45.8

The revision to the headline reading sees it unchanged for the month of July, even as the output index declines to a seven-month low. Employment conditions also experienced a decline and there were further drops in purchasing activity and inventories, while business confidence weakened to a four-month low. HCOB notes that:

“The widely held belief that the eurozone's recovery would pick up speed in the second half of the year is taking a hit, thanks to the latest HCOB PMI index for the manufacturing sector. Earlier this year, it looked like the sector might gradually climb out of the production slump it had been in for months, but the doubts that surfaced in June have been intensified by an accelerated decline in production in July. Given this weak data, we'll probably need to lower our GDP growth forecast for the year from 0.8%.

“The weak demand situation has gotten even worse since June, meaning rising input prices can't be passed on to customers so easily. This means shrinking profit margins for businesses. If this trend keeps up, it spells trouble for investment and future growth, as companies will likely start cutting costs. On the flip side, the European Central Bank might have mixed feelings about this. Sure, rising input prices could push inflation up, but falling profit margins might help keep that inflationary pressure in check.

“Demand won't bounce back anytime soon. Incoming orders, which have now dropped for 27 months straight, declined even faster in July. Companies don't seem to have much hope that things will get better soon. In fact, they cut their workforces more sharply in July and their confidence in future production growth has dipped below the long-term average.

“Industrial activity in the eurozone took a hit across the board in July. Among the countries covered by the PMI survey, only Greece and Spain are still seeing meaningful growth, although even there, momentum has slowed significantly. Austria and Germany are showing the greatest weakness. The widespread and steep downturn is surprising, making it more likely that the manufacturing sector will face tough times in the coming months.”