- Previously 53.2
- Composite PMI 50.9 vs. 50.8 provisional
- Previously 52.2
Both the services and headline indices were at three-month lows, reaffirming the slowdown in the economy towards the end of the second quarter. Notably, demand for euro area goods and services fell for the first time since February. Overall, price pressures have eased somewhat, but the good news is that they remain above pre-pandemic levels. In terms of individual performance, the German economy weakened further in June, remaining a major drag, but should recover in July as Euro 2024 continues. HCOB notes:
“Euro area growth is driven entirely by the services sector. Although the manufacturing sector weakened significantly in June, services sector activity growth remained roughly as robust as in the previous month. Given the upward revision to the preliminary PMI figures, it is likely that services providers will remain a decisive force in keeping overall economic growth in positive territory for the remainder of the year.”
“Looking at the top four euro area economies, it is pleasing to see that the recovery in the services sector has been broad-based. Spain again significantly outperformed Germany and Italy in June, both of which showed a faster pace of growth. Only services providers were unable to expand activity. In a sign of optimism, businesses in all four euro area countries are hiring more people, which is in line with survey respondents' view that activity will be stronger a year from now, with mood improving from already good levels, particularly in Italy.”
“The European Central Bank (ECB), which cut interest rates in June, has found some support in this decision from the HCOB Services PMI price index. Input prices and prices charged to customers rose at the slowest pace in three years. The ECB is likely to remain cautious going forward as price increases are still well above pre-pandemic averages and remain abnormally high given the fragile state of the economy.”
“The services sector is, in our view, supported by rising tourist numbers. The index of new exports, which includes tourism, has been on an almost continuous upward trend for six months and is now nearly two percentage points above its long-term average. According to private statistics, tourist arrivals to Europe, including an unusually high number from the United States, grew by 7.2% year-on-year in the first quarter of 2024 and are now above pre-COVID-19 levels. In Germany, the European football championship is giving tourism an additional boost. Tourism is likely to remain an important growth driver in the euro area in the coming months.”
