The European manufacturing sector saw its recovery accelerate in June, but the UK’s vote to leave the European Union could bring that recovery to a total standstill, according to the latest PMI data released by Markit on Friday morning.
Markit’s PMI reading for June showed that the continent’s manufacturers enjoyed their fastest growth of 2016 so far. The Eurozone hit 52.8 in June, up from 51.5 in May, and ahead of the 52.6 flash reading from earlier in June. That’s the biggest single-month jump so far in 2016.
Unfortunately for the continent’s manufacturers, the data was collected before Britain decided to leave the European Union last week, and a result, the burgeoning recovery of the previously depressed manufacturing sector could be pretty short lived.
The purchasing managers index (PMI) figures from Markit are given as a number between 0 and 100.
Anything above 50 signals growth, while anything below means a contraction in activity — so the higher the better.
It wasn’t just the Eurozone as a whole where things picked up in June. Across individual economies in the single currency, pretty much every reading was a beat on expectations. Here’s a look at the manufacturing industries in some of the Eurozone’s biggest economies:
- Germany — 54.5, a beat on the flash reading of 54.4
- France — 48.3 against a flash reading of 47.9. Still in contraction, but coming closer to growth.
- Italy — 53.5, a beat on the expected 52.5, and well above the flash 52.4 reading.
- Spain — 52.2, just above the consensus estimate of 52.1 and the previous reading of 51.8.
- Greece — 50.4, out of contraction, and well above the 48.4 seen at the last reading.
Here’s Markit’s chart showing the uptick in the industry:
And here’s what Chris Williamson, Markit’s chief economist had to say at the release of the data:
“Euro area manufacturers enjoyed their strongest growth so far this year in June. An upturn in the rate of production growth signals factory output is expanding at a near-2% annual pace, which should help to drive further modest economic growth in the second quarter. New orders and exports also rose at faster rates, prompting a welcome upturn in hiring.
“However, the data were collected prior to the UK EU referendum result, so any Brexit impact is yet to be seen in the PMI.
While the full brunt of Brexit is obviously expected to be felt in the UK, the Eurozone obviously has extremely close links to the UK, and as a result, manufacturers will take a huge hit in the coming months. “Given the uncertainty caused by the prospect of Brexit, it seems likely that business and consumer spending will be adversely affected across the euro area in the short term at least, pulling growth down in coming months,” Williamson noted.