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EUROZONE GLOBAL OUTLOOK

by Chris Anderson

Strength and Growth Continue

Quarter 2 of 2023 will likely see a continuing slowing in the overall manufacturing scenario in the Eurozone. Metals and Mining, Construction and Machinery and Equipment are markedly trailing. Automobiles and auto parts, and transportation are showing up well. Good growth is forecast for the services sector. There is an ongoing trend to lower input prices and to improvement in suppliers’ delivery times.

We await with interest the various PMI figures for the month of April. Here is a reminder of the results for March:

· Composite, 54.1 vs 52.0 February, 10-month high

· Services PMI, 55.6 vs 52.7 February, 10-month high

· Manufacturing output index, 49.9 vs 50.1 February, 2-month low

· Manufacturing PMI, 47.1 vs 48.5 February, 4-month low.

France and Germany both showed good performance on the services side, but Germany’s manufacturing performance was at an almost three-year low. Let it be said that expectations in the manufacturing sector remain low at the present time.

· France, flash composite, 54.0 vs 51.7 February; 10-month high

· France flash services PMI, 55.5 vs 53.1 February; 10-month high

· France, flash manufacturing output index, 46.9 vs 45.0 February; 2-month high

· France, flash manufacturing PMI, 47.9 vs 50.5 January; 4-month low

· Germany, flash composite, 52.6 vs 50.7 February; 10-month high

· Germany, flash services PMI, 53.9 vs 50.9 February; 10-month high

· Germany, flash manufacturing output index; 50.1 vs 50.2 February, 2-month low

· Germany, flash manufacturing PMI, 44.4 vs 46.3 February, 34-month low.

The Eurozone, similar to other areas of the world, is seeing Services hold up and Manufacturing weaken.

Manufacturers in the 28 countries that make up the Eurozone, like their counterparts in the U.S., are reluctant to reduce headcount when hiring has been difficult and training expensive. Unless there is a marked decline in new orders, manufacturers will weather the current economic conditions through Q2 and into Q3. By that time, there may be clearer indications of where the economy will trend in late 2023 and into 2024.

Manufacturers continue to burn off excess inventory purchased ‘just in case’ their supply chain continued to be inconsistent before switching back to just-in-time. As the pandemic disruptions fade into history, consumer demand will drive the next manufacturing upturn in the Eurozone. So far, consumer confidence is fair as things approach summer, so the outlook remains favorable but not necessarily strong.

APRIL 2023

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