- Previously 53.2
- Manufacturing PMI 45.6 vs. 47.9 expected
- Previously 47.3
- Composite PMI was 50.8 (forecast: 52.5)
- Previously 52.2
Eurozone business activity slowed sharply towards the end of the second quarter, with manufacturing continuing to be a drag, and eurozone production measures are expected to fall to their lowest level in six months, while services sector measures also eased but remained at their lowest in three months.
In more detail, new orders fell for the first time in four months, while employment growth slowed to its slowest since March.
“Is the manufacturing recovery over before it even began? We, and the market consensus, had expected the index to follow up its rise in May with another upturn in June, laying the foundations for an upward trend. However, the HCOB flash Eurozone manufacturing PMI reading fell rather than approaching expansionary territory, dashing hopes of a recovery. The setback was compounded by the fact that new orders, which are typically a good indicator of near-term activity, fell at a much faster pace than in May. The sharp decline in new orders suggests that the recovery may have further to go than initially expected.”
“The services sector continues to support the euro area. Activity did not recover as much as last month and was below most analysts' expectations, but overall expansion was solid. In tandem with the soft activity figures, service providers were somewhat more modest in terms of staffing increases. Using the preliminary HCOB flash euro area composite production index in a simple regression analysis, second-quarter GDP estimates have been revised slightly downwards, but still point to positive growth of 0.2% compared to the first quarter.
“The ECB may feel vindicated after cutting rates in June, with price data suggesting easing pressures on the euro area's services sector. However, the HCOB PMI does not support the ECB to cut rates further in July, as service providers in Germany, the euro area's largest economy, are raising selling prices at a sharper pace than in May. Moreover, after experiencing production cost deflation over the past 14 months, euro area manufacturers may see a return of selling price inflation, with input prices in the region rising in June for the first time since February 2023.”
“The worsening situation in both the French service and manufacturing sectors may be linked to the outcome of the recent European Parliament elections and the general election result announced by President Emmanuel Macron on June 30th. This unexpected turn of events has generated a lot of uncertainty about future economic policies and likely caused many companies to put the brakes on new investments and orders. In any case, it is clear that the poor performance of the French economy is a major contributor to the worsening economic situation in the euro area.”
