Euro Area: Business activity contracts in July

Euro Area PMI July 2022

Euro Area: Business activity contracts in July

The flash Eurozone Composite Purchasing Managers’ Index (PMI) fell to 49.4 in July from 52.0 in June, marking the worst reading since February 2021—when much of the region was in lockdown due to Covid-19. Moreover, the index moved below the 50 no-change threshold, signaling a contraction in business conditions.

July’s decrease was led by manufacturing output contracting at a sharper pace and another marked cooling in services sector activity growth. New orders fell for the first time since February 2021. Moreover, the pace of hiring was the softest in 15 months, while business expectations reached the weakest level since May 2020—just after the outbreak of the pandemic—due to concerns over waning demand, energy prices, supply disruptions and inflation. On the price front, input inflation eased in the services and manufacturing sectors, but remained above pre-pandemic highs.

Commenting on the release, Chris Williamson, chief business economist at S&P Global Market Intelligence, stated:

“The eurozone 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”.

Commenting on the release, Bert Colijn, senior economist at ING, stated:

“The sharp decline in the composite PMI […] indicates that recessionary pressures are becoming more widespread in the eurozone economy. For the European Central Bank, this confirms our view that it will only hike another 50 basis points in total this year.”

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