- Prior 52.0
- Composite PMI 48.6 vs 48.9 prelim
- Prior 49.9
The headline reading is a six-month low as the euro area economy cools further to start Q3. A weakening in demand conditions is the main culprit but at least price pressures are also seen easing further, though they remain primarily services-driven. HCOB notes that:
“The Eurozone is off to a bad start in the second half of the year. According to the PMI, economic output fell in July after stagnating the month before and showing generally solid growth during the first five months of the year. The slump in activity is driven by manufacturing, but services activity growth has cooled off too, scaling back the support to the economy as a whole.
“It does not require crystal ball powers to see employment growth coming to a halt over the next few months given dimmer prospects for the economy. However, at least for now companies are still rather reluctant to trim down the staff in the services sector. Rather, they decide to hire fewer people.
“In the services sector, a weak phase is heralded by the fall of the incoming new business index into contractionary territory. Amid this development it may be worrisome for the European Central Bank that inflation decreased only slightly in comparison to the month before, according to the PMI survey.
“The development in the services sector of the Eurozone is remarkably diverse. While the French service companies have put the brakes on their activity, Spanish companies are still expanding at rather healthy pace, despite a considerable slowdown since the first quarter. Spanish companies are also still in a hiring mood, while the Italian firms have started to cut employment. The contrasting economic performance is making the already-difficult job for the ECB even more challenging.”
