Eurozone Private Sector Slips Into Contraction
The euro area private sector contracted in July as a deepening downturn in manufacturing was accompanied by another slowdown in the service sector, final survey results from S&P Global showed on Wednesday.
In June, retail sales declined unexpectedly as high inflation weighed on spending, figures from Eurostat revealed today.
The final composite output index slid to 49.9 in July from 52.0 in June. The score was moderately above the flash 49.4. The score fell below the neutral 50.0 for the first time since February 2021, suggesting contraction in the private sector.
The survey showed that high inflation dampened demand and business intakes in July. Despite slight cooling of inflationary pressures, rates of increases in both input costs and output prices were the faster than anything seen prior to their recent highs.
Amid growing concerns surrounding future gas supply, risks of a recession in Europe and persistently high price pressures, business confidence declined in July to its weakest level since the first half of 2020.
The manufacturing sector was a significant drag on the euro area economy as production declined at the fastest rate since May 2020. At the same time, services activity continued to rise, but growth slowed to its weakest since the Omicron-related disruption at the start of the year.
The services Purchasing Managers’ Index dropped to 51.2 in July from 53.0 in June. The flash score was 50.6.
The eurozone economic outlook has darkened at the start of the third quarter, with the latest survey data signaling a contraction of GDP in July, Chris Williamson, chief business economist at S&P Global Market Intelligence said.
Among big-four economies, declines in composite PMIs were registered across the board.
Germany and Italy both reported declines in overall output levels, with indices here slumping to 25- and 18- month lows respectively. France and Spain continued to grow at the beginning of the third quarter, although momentum losses were seen in both cases.
Germany S&P Global/BME final composite output index declined to 48.1 from 51.3 in the previous month. The flash reading was 48.0. At 49.7, the final services PMI was down from 52.4 in June but above the preliminary score of 49.2.
Italy’s private sector entered the contraction territory for the first time since January 2021 as both manufacturing and services dipped into decline in July. The composite output index posted 47.7, down from 51.3 in June. Likewise, the services PMI slid to 48.4 from 51.6 in the previous month.
France’s private sector continued to expand in July but the pace of growth was the slowest since April 2021. The composite PMI dipped to 51.7 from 52.5 a month ago but was above the flash 50.6. The final services PMI came in at 53.2 versus 53.9 in June. The preliminary score was 52.1.
Spain’s composite private sector growth weakened in July to its weakest in half-a-year of expansion. The composite index dropped to 52.7 from 53.6 in June. At the same time, the services PMI registered 53.8, slightly down from 54.0.
Data published by Eurostat showed that euro area retail sales volume decreased 1.2 percent on a monthly basis, confounding expectations for an increase of 0.1 percent and May’s 0.4 percent gain.
Food, drinks and tobacco sales were down 0.4 percent and non-food product sales decreased 2.6 percent. At the same time, automotive fuel in specialized stores slid 1.1 percent.
Year-on-year, retail sales logged a decrease of 3.7 percent, reversing a 0.4 percent rise in May. Economists had forecast an annual fall of 1.7 percent.
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