Eurozone business growth slowed sharply in June, PMI shows

OVERALL business growth across the eurozone slowed sharply last month as a solid expansion in the bloc’s dominant services industry failed to offset a further deterioration in manufacturing, a survey showed on Wednesday (Jul 3).

HCOB’s composite Purchasing Managers’ Index for the currency union, compiled by S&P Global and seen as a good gauge of overall economic health, dropped to 50.9 in June from May’s 12-month high of 52.2.

It was just above a preliminary 50.8 estimate and the fourth consecutive month above the 50 mark separating growth from contraction.

“Growth in the eurozone can be attributed fully to the service sector. While the manufacturing sector weakened considerably in June, activity growth in the services sector continued to be nearly as robust as the month before,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

The services PMI dipped to 52.8 last month from 53.2 but was ahead of the 52.6 flash estimate.

Manufacturing activity across the bloc took a turn for the worse last month as demand fell at a much faster pace despite factories cutting their prices, a sister survey showed on Monday.

Falling demand for manufactured goods, alongside slower growth for services, meant the composite new business index slumped below breakeven for the first time since February, registering 49.4 compared to May’s 51.6. The flash reading was 49.2.

That was despite the European Central Bank delivering a widely predicted cut to interest rates last month. It is expected to cut again in September and December, according to a Reuters poll.

Strong wage data and still sticky price pressures have increased uncertainties around the rationale for more cuts but both input and output cost pressures eased, according to the PMI.

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Charges levied by services firms rose at the slowest pace in over three years. The output prices index fell to 53.5 from 54.2.

“The ECB ... is getting some support for this decision from the HCOB Services PMI price indices,” de la Rubia added.

“Looking forward, the ECB will remain cautious, as the price increases are still way above pre-pandemic averages and still unusually high given the fragile state of the economy.” REUTERS