Eurozone business growth slows down in July

Eurozone business growth slows down in July

Mubasher: Flash estimates for the Eurozone showed that economic activity growth lost momentum again in July, after a brief recovery in June, but remained relatively strong, according to official data released on Tuesday.

The flash IHS Makit Eurozone purchasing managers’ index (PMI) registered 54.3 in July down from 54.9 in June, which marked the second weakest reading since November 2016.

The PMI gauging activity in the manufacturing sector stabilised at a two-month low of 54.2 in July, while the flash PMI for service business activity fell to 54.4 compared to 55.2 in June.

Manufacturing output growth remained unchanged in July at a 19-month low observed in the previous month, while business activity in the service sector retreated from the four-month high, at the second weakest pace in the past year and a half.

As for new orders, the inflows have seen a deteriorated growth rate this month, suggesting that it will weaken again in August.

This was the lowest new business expansion rate seen since October 2016 in the manufacturing and service sectors. Factory order book hit the lowest level in two years, while the gains in the service sector were the second lowest for a year and a half.

This reflected a slower flow of unfinished work, which saw the smallest accumulation of outstanding work since September 2016.

The rate of employment eased commensurately in July, but remained strong, the data showed. 

Outlook for business activity dropped to a 20-month low, indicating a future slowdown in the output growth and job creation. For manufacturing, expectations regained some ground in the seventh month of this year, after falling to a 31-month low in the previous month, while they slipped to the lowest level since November 2016 in the service sector.

Price inflation eased slightly in both sectors, while the headline index inched down from June, to its third-highest level in seven years.

“The renewed slowdown comes as a disappointment, confirming suspicions that June’s rebound was temporary, largely due to businesses in some countries making up for an unusually high number of public holidays in May,” IHS Markit’s chief economist Chris Williamson said.

“The big question going forward will be the extent to which domestic demand can remain sufficiently resilient to cushion the Eurozone economy from the potential adverse impact of an escalating trade war on exports,” Williamson added.

By 8:39 am GMT, the EUR/USD pair inched down 0.07% to $1.1684.