Eurozone Manufacturing Struggles Amid Weak Global Demand

Eurozone Faces Longest Manufacturing Downturn Since 1997
The eurozone manufacturing sector remains deeply in contraction, marking its 28th consecutive month of decline in October 2024. According to the latest data from Hamburg Commercial Bank (HCOB) and S&P Global, the region’s Manufacturing Purchasing Managers’ Index (PMI) rose slightly from 45.0 in September to 46.0 in October. However, a PMI below 50 indicates ongoing contraction, signaling a prolonged downturn that has now lasted for more than two years. This sustained period of decline is the longest the eurozone manufacturing sector has faced since records began in 1997.

Declining Production and Persistent Weak Orders
Eurozone factories experienced a 19th consecutive month of production declines in October. In addition to the slowdown in production, new factory orders also dropped, with companies continuing to rely on existing inventories of raw materials that were accumulated during the COVID-19 pandemic stockpiling. HCOB’s chief economist, Cyrus de la Rubia, pointed out that businesses had purchased massive amounts of materials and intermediate goods in 2021 and 2022, but with weak global demand and no urgent need to replenish inventories, companies have adopted more cautious purchasing practices. This shift has contributed to the deflationary pressures in the region’s manufacturing industry, with limited new demand and intense competition among producers driving down both prices and profit margins.

Global Trends and Weak Consumer Demand Impacting the Sector
The eurozone’s manufacturing struggles are compounded by a broader global slowdown. With weak consumer spending and no immediate recovery prospects, competition remains fierce among manufacturers, further intensifying the deflationary cycle. The lack of demand is exacerbating the industry’s challenges, making it difficult for companies to regain a foothold in a competitive global market. Manufacturers are under increasing pressure to adapt to a rapidly changing market environment, where weak demand and overcapacity are pervasive.

Similar Trends Seen in the UK Manufacturing Sector
The difficulties faced by eurozone manufacturers are echoed across other regions, notably in the UK. The UK manufacturing sector also entered contraction in October, marking its first decline in six months. The S&P Global manufacturing PMI for the UK fell to 49.9 from 51.5 in September, driven by a “wait-and-see” approach as businesses anticipate the government’s first budget under the new administration. While UK production had shown positive growth for six consecutive months, new factory orders in the country fell for the first time since April 2024. This mirrors the broader weakness in global manufacturing, where deflationary pressures and sluggish demand continue to hinder growth prospects.

The Road Ahead for Manufacturers
With the global slowdown and lack of fresh demand showing no signs of abating, the eurozone and UK manufacturing sectors are likely to remain stuck in a prolonged period of contraction. Manufacturers must adapt to the ongoing inventory overhang, heightened competition, and reduced consumer demand. As global supply chains and demand patterns continue to shift, the industry will face an uncertain future, with little immediate hope for recovery.