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Eurozone inflation hits new highs while final manufacturing PMI falls to lowest level in 2 years

According to the Statistical Office of the European Union (Eurostat), inflation in the euro zone again reached a record level in June after being exposed to increasing price pressure. Inflation is expected to rise for several more months. This makes it highly likely that the European Central Bank (ECB) will start raising interest rates in July.

According to Eurostat, inflation in the euro countries rose from 8.1% to 8.6%, mainly due to rising energy prices. However, food and service prices also continue to play a major role.

Inflation has been rising steadily for more than a year now, starting with supply-side problems after the lockdown measures. At present, pressure is mainly coming from rising energy prices in the wake of the sanctions imposed on Russia.

The final eurozone manufacturing purchasing managers’ index fell to 52.1 in June from 54.6 in May, the lowest level since August 2020, S&P Global reported.

The PMI index remains above the 50 mark, indicating that the manufacturing sector in the euro zone is continuing to expand.

Industrial production in the euro zone fell in June for the first time since COVID-19 broke out two years ago. Rising product prices combined with the sluggish economic outlook are impacting consumers’ purchasing decisions.

The yield index fell to 49.3, with numbers below 50 indicating a contraction. It also hit a 2-year low, compared with 51.3 in May.

“Eurozone manufacturing PMI fell in June. Production fell for the first time in two years amid an intensifying demand-side downturn,” said S&P Global Market Intelligence’s chief business economist.

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