In the euro area, signs of a slowdown are multiplying. For example, after six months of expansion in Germany, the Ifo index, which measures the business climate, fell slightly to 91.7 points in May from 93.6 points in April.
Entrepreneurs are worried about increasingly expensive credit in Europe that weighs on consumption and investment, the uncertainty around the debt ceiling in the United States, which risks precipitating the 1st world economy into recession, and the need for more dynamism.
Exact causes, same consequences for the HCOB PMI® Flash index for the euro area, which measures business activity. Overall activity fell slightly to 53.3 points in May from 54.1 points in April.
The services sector remains growing but is slowing down (to 55.9 points in May against 56.2 in April). Nevertheless, businesses in this sector remain confident, particularly as they continue to shift cost increases to consumers, preserving their profit margins. The real problems are in manufacturing. At just 44.6 points (down from 45.8 the month before), the manufacturing index is at its lowest level in 36 months during the pandemic lockdowns.
It should be noted that the order books are gradually emptying, which does not immediately suggest a rebound in production—quite the contrary. A promising job market, a high savings rate after the pandemic, and state support have allowed the eurozone economies to remain afloat in the first half of 2023. But with the cost of credit still on the rise, inflation still high, which weighs on purchasing power and in the absence of a real locomotive for global growth, the second half of the announcement is much more difficult.
After an excellent start to the year, the eurozone stock exchanges are beginning to doubt. Therefore, we reserve investment in the eurozone only for individual equities.