Eurozone business activity returned to growth in July after four months of stagnation, and cost pressures cooled
The eurozone economy stopped stalling in July. S&P Global's flash Composite PMI Output Index, a survey of purchasing managers released Friday, rose to 51.9 from 50.0 in June, where any reading above 50 signals expansion. That is a five-month high, and it points to the first genuine growth in private-sector activity in four months.
Manufacturing did the work. The flash manufacturing output index reached 53.0, the highest in 52 months, and factory production grew at the fastest pace since March 2022. The headline manufacturing gauge, which weights new orders and other components differently, rose to 52.0. Services, which had shrunk for three straight months, came back to 51.6. New orders across the private sector rose for the first time since February, and companies added to payrolls for the first time this year.
The recovery was uneven across the bloc. Germany, the largest economy, grew for the first time in four months. France kept contracting, though the decline softened to its mildest since February. The rest of the eurozone together expanded at the strongest rate in eight months, on order inflows the report described as the heaviest in more than four years.
Cost pressures eased. The report put input-price inflation at its lowest since February, which is the month it repeatedly uses as a marker for the outbreak of war in the Middle East. Chris Williamson, chief business economist at S&P Global Market Intelligence, said the pace of growth was consistent with quarterly GDP of about 0.3 percent, the best since that war began, and that the cooling in costs "will take pressure off the ECB in terms of any imminent need for further rate hikes."
There is a caveat the report makes itself, and it is the one that matters. The panel was surveyed between July 9 and July 22. Williamson noted that oil prices are rising again and that shipping worries are escalating, and he warned the economy could relapse if energy costs and supply disruption return. Brent went back above $100 this week. The survey caught the recovery. It did not catch what came after.
