The July activity surveys cast doubt on continuing the economic recovery in the Eurozone. In crisis since the summer of 2022, the manufacturing sector saw its activity decline, accentuated in July.
All indicators, such as employment, production, and inventories, point to a continuation of the crisis in the Eurozone's manufacturing industry. This is particularly the case in Germany, where the sector's players are unable to get out of a deep slump. The slowdown in foreign demand is not likely to improve the situation.
Services growing less in July
The slowdown in the services sector, which was a key driver of the economic recovery in the first half of the year, has had a noticeable impact on the overall economic activity. While the sector is still expanding, it is doing so at a slower pace than in previous months. Companies in the services sector are also expressing less confidence about their future activity in 2025.
With the manufacturing sector in crisis and the services sector showing less dynamism, the economic activity in the Eurozone has virtually stagnated. In fact, it even experienced a decline in Germany for the first time in four months.
This is raising concerns about a potential halt in the European economy in the last six months of the year. The already weak growth forecast for 2024, with a GDP growth of only 0.8%, is likely to be revised downwards.
Because of this weak economic outlook, we do not buy eurozone equities as part of our portfolio strategy.