Euro Zone Business Activity Contracted In July As Price Rises Bite

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Euro zone business activity unexpectedly contracted this month due to an accelerating downturn in manufacturing; and a near-stalling of service sector growth as burgeoning costs pushed consumers to cut back on expenditure, a survey showed.

S&P Global’s flash Composite Purchasing Managers’ Index (PMI); seen as a good gauge of overall economic health, fell to 49.4 in July from 52.0 in June; well below all forecasts that had predicted a more modest dip to 51.0.

“The euro zone economy looks set to contract in the third quarter as business activity slipped into decline in July. And forward-looking indicators hint at worse to come in the months ahead,” said Chris Williamson; chief business economist at S&P Global. “Excluding pandemic lockdown months, July’s contraction is the first signalled by the PMI since June 2013; indicative of the economy contracting at a 0.1% quarterly rate.”

“Business expectations for the year ahead have meanwhile fallen to a level rarely seen over the past decade as concerns grow about the economic outlook; fuelled in part by rising worries over energy supply and inflation but also reflecting tighter financial conditions,” Williamson said.


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