Weak euro zone economic data for June raised concerns about prospects for a recovery

Recently, the eurozone purchasing managers' index (PMI) data released in June showed a significant decline in manufacturing and services, and the momentum of economic recovery is worrying. The figure fell well short of market expectations, raising concerns about the progress of the eurozone's economic recovery.

The preliminary manufacturing PMI for the eurozone fell to a six-month low of 45.6 in June, well below market economists' expectations of 47.9, according to a report from Standard & Poor's Global and Hamburg Commerzbank. Meanwhile, the services PMI index also fell to 52.6, also missing market expectations of 53.5. As a result, the eurozone composite PMI index slipped to 50.8, below market expectations of 52.5, ending several months of recovery.

Manufacturing in Germany and France, the euro zone's two largest economies, was particularly weak, with both falling far more than expected. Among them, France's composite PMI accelerated to the 50-growth line, showing that the country's economic activity is gradually shrinking. Germany's PMI also edged closer to the 50 mark, indicating a slowdown in the country's economic recovery.

It is worth noting that although the eurozone services sector remained in expansion territory in June, the pace of growth slowed significantly. At the same time, output cost prices for eurozone manufacturers rose in June after 14 consecutive months of decline, putting pressure on corporate profitability.

In the report, Cyrus de La Rubia, chief economist at Commerzbank Hamburg, noted that the euro zone manufacturing sector unexpectedly pulled back sharply in June, especially the accelerated decline in new orders, indicating that economic recovery may be further away than initially thought. While GDP is still likely to have grown by 0.2% quarter-on-quarter in the second quarter, the political turmoil has created a lot of uncertainty about future economic policy.

At the same time, the economic outlook for the eurozone is also affected by the upcoming parliamentary elections in France. Uncertainty about the outcome of the election could lead to changes in the direction of policy, creating uncertainty about companies' investment and production plans. Bert Kohli, senior economist at ING Bank Group, said that with euro risks returning around the French election, interest rates remain high and the eurozone economy is performing better than last year, but headwinds remain.

The weak performance of the French economy has a clear impact on the overall economic situation in the eurozone. Norman Liebke, an economist at Commerzbank Hamburg, believes that the French economy weakened significantly again in June, which may be related to the uncertainty of the upcoming election causing French companies to postpone production and investment plans. In addition, the European Commission this week recommended the imposition of debt regulations on seven countries, including France and Italy, posing a new challenge for the French government.

In terms of debt regulation, the EU's new Stability and Growth Pact, which entered into force in April, aims to significantly reduce the eurozone's current high levels of public debt. However, the debt problems of countries such as France and Italy remain a focus for the EU. French Finance Minister Bruno Le Maire has warned that France could face a "debt crisis" if the right-wing National Alliance or the left-wing Alliance wins the parliamentary election by a large margin.

In addition to debt problems, the euro zone faces challenges from weak consumer confidence and a weak housing market. The European statistical office's consumer confidence survey for June also missed market expectations, showing that euro zone consumers are less confident about the economic outlook. Meanwhile, the latest house price data in Germany showed that the crisis in the property market is not yet over, with house prices falling for the sixth consecutive quarter.

In response to the weak performance of the eurozone economy, the market is widely expected that the European Central Bank may cut interest rates further to stimulate economic growth. However, ECB officials have recently said that future monetary policy actions will depend on economic data. Against this backdrop, the recovery prospects of the eurozone economy remain uncertain.