Other tailwinds that boosted recovery from the pandemic are also subsiding. The manufacturing sector, in particular, has taken a hit, with the sector's Purchasing Managers Index (PMI) slipping into contraction territory at 43.6 in June. This downturn is attributed to the return of inventories to pre-pandemic levels and the absorption of most of the backlog in production, as per S&P Global’s Economic Outlook Eurozone Q3 2023.
Meanwhile, energy-intensive sectors are still struggling to recover. Despite a significant drop in gas prices, their output in April remained 11 per cent lower than before the energy crisis. The permanence of the loss of energy-intensive production in Europe is still uncertain, though if it proves to be transitory, a recovery could positively impact the economic outlook.
The fading post-pandemic recovery is also likely to leave a significant mark on the labour market. Employment rose by 0.6 per cent in Q1 2023, but S&P Global anticipates much smaller increases in the upcoming quarters. This prediction aligns with falling productivity, rising unit labour costs, and a reduction in still-high job vacancies over the past two quarters.
As per the analysis, online job vacancies suggest that the downward trend is likely to continue throughout Q2.
ALCHEMPro News Desk (DP)
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