Eurozone Private Sector Shrinks Most In 8 Months

Eurozone Private Sector Shrinks Most In 8 Months

August 10, 2023

Euro area private sector contracted the most in eight months in July due to the deepening downturn in manufacturing and a near-stalling of services output.

The final HCOB composite output index fell to an eight-month low of 48.6 in July from 49.9 in June, S&P survey results showed Thursday. The flash score was 48.9.

At 50.9, the services Purchasing Managers’ Index, or PMI, hit a six-month low from June’s 52.0. The reading was well below the flash reading of 51.1.

There was a sharp reduction in demand for euro area goods and services in July. New business dropped for the second straight month, with a sharp fall in new export orders.

Due to the fall in order books, backlogs of work decreased the most since the first half of 2020. Job creation grew at the slowest pace in almost two-and-a-half years in July amid deteriorating demand and a sustained progress on the completion of pending workloads.

Further, the survey showed that business sentiment fell to the weakest level seen in the year-to-date. Both manufacturers and service providers were less optimistic towards the 12-month outlook.

Price pressures continued to cool in July. Input cost inflation eased to a 32-month low and output price inflation was considerably cooler than the rates seen in the first few months of 2023.

Germany’s private sector moved back into the contraction territory in July due to a slower growth in services activity and a deeper fall in manufacturing output. The S&P Global/HCOB final composite output index registered 48.5 in July, down from 50.6 in June. The flash reading was 48.3.

The service sector grew at the weakest pace since February. The services PMI dropped to 52.3 from 54.1 a month ago. But the reading was above the initial estimate of 52.0

At the same time, France posted its biggest fall since November 2020. The composite output index fell further to 46.6 in July, as initially estimated, from 47.2 a month ago.

At 47.1, the services PMI hit the lowest since February 2021 and was down from 48.0 in June. The flash reading was 47.4.

Italy’s private sector contracted again in July as the increase in services activity was not enough to offset the fall in manufacturing. The HCOB composite output index registered 48.9 in July, down from 49.7 in the previous month. The score was the lowest since November.

The services activity expanded in July but growth softened to a half-year low as sales broadly stagnated. The services PMI fell to 51.5 in July from 52.2 in June.

Spain’s private sector expansion was the weakest since January amid deepening downturn. The composite PMI logged 51.7 compared to 52.6 in June.

The services sector registered growth for the ninth consecutive month in July. The services PMI slid to 52.8 from 53.4 in June.

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