After the excitement of the Olympics, the eurozone has returned to reality. Governments are struggling to come up with budgets and economic indicators are disappointing. There were no major changes in industrial production statistics for June. The small month-on-month decline continued the contraction that began in September 2022. It has to be said that a large part of the decline is due to volatile Irish economic data, but regardless of this volatility, the picture remains bleak.
The outlook offers little reassurance for manufacturing. The survey points to weaker orders early in the third quarter, resulting in a further contraction in production. Additionally, inventories remain high, indicating that there is very limited scope for an imminent recovery in industrial production.
The problem for the industry is that consistently weak demand is met by increasing cost pressures. Consider the rise in energy prices and transportation costs as a result of conflicts in the Middle East. Due to weak demand, pricing these high costs to consumers will be much more difficult than in 2021-2022. This means margin pressure is likely to remain a theme for manufacturers in the second half of 2024.
This morning, it was confirmed that GDP growth for the second quarter was 0.3%, meaning short-term upside is limited and will depend heavily on the performance of the services sector. Recent figures cast doubt on the strength of the services sector, dampening expectations for GDP growth for the rest of the year.
