Eurozone business activity returned to growth in July after a four-month downturn, driven primarily by an influx of new orders. However, the economic outlook continues to be dampened by high inflation and ongoing conflicts in the Middle East, according to preliminary flash survey results released today by S&P Global. Germany recorded a noticeable improvement, and while the situation in France also improved, activity there remains in contraction.
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Eurozone PMI Smashes Forecasts and Hits 5-Month High
The Composite Purchasing Managers’ Index (PMI), which tracks both manufacturing and services activity and is considered a reliable gauge of overall economic health, rose to a flash reading of 51.9 points for July in the Eurozone. This marks a five-month high and significantly beats expectations of analysts polled by Reuters, who had anticipated only a modest increase to 50.3 points.
Furthermore, following data revisions, the June figure turned out substantially better than initially reported. While preliminary data indicated the composite index stood at 49.5 points, today’s report revealed that after the final revision, the index landed exactly at the 50.0 mark. This is the crucial threshold separating growth from contraction – anything below 50 points indicates a decline in activity.
“July brings a welcome rebound in Eurozone economic activity, but given the unstable geopolitical situation, it remains to be seen whether this positive development can be sustained over the longer term,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
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Demand Rebounds as New Orders Grow at Fastest Pace Since 2023
New orders rose for the first time since February, with the pace of growth being the fastest since April 2023. Export orders, which also include intra-eurozone trade, continued to decline, though the pace of this contraction was the weakest since March 2022.
Both the manufacturing and services sectors contributed to the recovery in output. The services sub-index rose to 51.6 points from June’s 49.4, hitting a five-month high and snapping a three-month decline. This came as a surprise to analysts, who had expected continued stagnation. Meanwhile, manufacturing output growth reached a 52-month high, with its sub-index rising to 52.0 points from 51.4 in June, beating analysts’ forecasts of a modest increase to 51.5.
Germany, the Eurozone’s largest economy, returned to growth for the first time in four months, with its composite activity index climbing to 51.2 points from June’s 49.5. Output in France continues to fall, but now only marginally. The French composite index rose to 49.6 points from 47.2 in June, indicating a much milder contraction in activity. Meanwhile, the rest of the Eurozone countries recorded their strongest economic expansion in the last eight months.
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Source: Reuters
