Growth in euro-zone business activity stalled last month as a stuttering expansion in the bloc’s dominant services industry was compounded by a deeper downturn in the manufacturing sector, a survey showed on Monday.
HCOB’s composite purchasing managers’ index (PMI) for the currency union, compiled by S&P Global and seen as a good gauge of overall economic health, fell to 50.2 in July from June’s 50.9.
It barely exceeded the 50 mark separating growth from contraction but was a tad above a preliminary 50.1 estimate and chalked up its fifth consecutive month in positive territory.
In the UK, a similar survey found that growth had picked up last month, as firms recorded the strongest levels of demand for more than a year.
Experts said there was a slight rebound following the result of the general election, which increased certainty for firms.
The S&P Global UK services PMI survey scored 52.5 in July, increasing slightly from 52.1 in the previous month, marginally ahead of economists’ predictions.
“The euro zone’s economy is growing at a snail’s pace in July,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. “Sector-wise, services is not picking up speed like it did earlier in the year, while the industrial slump has continued unabated.”
Within Europe, France’s dominant services sector picked up in July – to 50.1 from 49.6 in June – helped by business from the Olympic Games. However, in Germany, the growth slowed for the second consecutive month in July – to 52.5 from 53.1 – in a further sign that Europe’s biggest economy is losing steam.
Growth also slowed in Italy and Spain.
“If the service sector stalls, the whole economy could slip into a recession because manufacturing continues to shrink sharply,” Mr de la Rubia said. “Sadly, a recession is not just a distant possibility any more.”
A final PMI covering the services industry across the euro zone dropped to 51.9 last month from 52.8, matching a preliminary estimate. The manufacturing PMI published last week showed factory activity remained mired in contraction amid a broad-based malaise, with output declining at its fastest pace this year.
And suggesting no imminent turnaround, overall demand across the region fell for a second month – and at a sharper pace than in June. The composite new business index fell to 49.0 from 49.4.
The decline was despite firms raising prices at a slower pace in July than in June. Services inflation – closely monitored by the European Central Bank – moderated and the industry’s output prices index fell to 52.9 from 53.5. That was a low not seen since May 2021, and potentially gives the ECB room to ease policy further.
Having delivered a widely telegraphed rate cut in June, the ECB left its deposit rate at 3.75 per cent last month but is expected to trim it twice more this year, potentially as soon as September, a Reuters poll found. – Reuters
(c) Copyright Thomson Reuters 2024
