The chart below shows the Euro-zone (i.e., the countries which use the Euro) PMIs for manufacturing and services, both extreme-adjusted, and their average.
Manufacturing (dotted black line) is now as bad as it was during the covid crash (extreme-adjusted), and heading towards the GFC (2009) lows. Services (i.e., retailing, restaurants, travel, hotels, etc.) --- the dotted blue line --- were much worse affected by the lockdowns. Pent-up demand led to the early-2023 services "revenge spending" bounce, which lifted the economy, but which is currently fizzling out.
Why so much weaker than the USA, despite equally stringent monetary tightening? The misnamed "Inflation Reduction Act" has stimulated the US economy, but no similar program has been enacted in Europe. Proof positive (if you needed it) that fiscal stimulus works. Biden is returning us to the 1945-1984 Keynesian consensus, where the Federal Government was intimately involved in mitigating deep recessions. The long-term implications are interesting, politically and economically. For example, the divergence between the US and Europe suggests that Europe's interest rates may have peaked and may start falling soon, while, even if you believe that the Fed has stopped raising rates, the Fed Funds rate is unlikely to fall soon.
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| As usual, you should be able to get a clearer image by clicking on it |
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