Private sector activity in the eurozone showed near-stagnation in July, as the HCOB Flash Composite PMI Output Index dropped to 50.1 from 50.9 in June, S&P Global reported. This indicates a slowdown in growth, with output increasing for the fifth straight month but at the slowest pace during this period. The expansion in services continued for the sixth month but slowed to the lowest pace in four months. In contrast, manufacturing output declined for the 16th month, with the reduction accelerating to its fastest rate in 2024. New orders fell for the second month, with a slight acceleration in the reduction pace. New export orders dropped for the 29th month, reflecting ongoing challenges in securing international sales. Employment was flat in July, ending a six-month job creation streak as service providers increased staffing, albeit slowly, while manufacturing saw the largest decrease in employment for 2024. Inventories and purchasing activity in manufacturing also declined, and supplier delivery times improved slightly. Input prices rose sharply in July, with inflation reaching a three-month high; however, output prices increased more slowly due to limited pricing power from reduced demand. Overall, confidence in future business activity declined to a six-month low, impacting both the manufacturing and services sectors. Commenting on the data, Dr. Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said "If only growth was considered, you find a strong argument for a rate cut in September by the ECB. However, prices data did not provide hoped for relief." He noted that input prices in services rose faster, while manufacturing input prices increased for two months after a year-long decline, and that slight declines in output prices complicate achieving the 2 per cent inflation target. "while a September rate cut will most probably be exercised, it will be much trickier to follow this path in the months thereafter, unless the downturn morphs into a deep recession."De la Rubia added. Attribution: S&P Global.
