LONDON (Reuters) – The downturn in euro zone business activity worsened more than initially thought in July as the slump in manufacturing was accompanied by a further slowing of growth in the bloc’s dominant services industry, a survey showed.
HCOB’s final Composite Purchasing Managers’ Index (PMI), compiled by S&P Global and seen as a good gauge of overall economic health, dropped to an eight-month low of 48.6 in July from June’s 49.9.
That was below the 50 mark separating growth from contraction for a second straight month and shy of a preliminary estimate for 48.9.
“The euro zone is off to a bad start in the second half of the year,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
“The slump in activity is driven by manufacturing, but services activity growth has cooled off too, scaling back the support to the economy as a whole.”
Monday’s manufacturing PMI showed factory activity across the euro zone contracted in July at the fastest pace since COVID-19 was cementing its grip on the world and Wednesday’s services PMI showed slowing growth in the industry.
The headline services index fell to 50.9 from 52.0, coming in under the preliminary 51.1 reading.
Indicating there is a little chance of a turnaround anytime soon demand for services fell for the first time this year as indebted consumers felt the pinch from higher borrowing costs and prices. The new business index sank to 48.2 from 51.0.
Still, policymakers at the European Central Bank will likely take some cheer from further signs of easing price pressures. Both the composite input and output prices index fell last month with the one monitoring charges levied on customers down to 53.1 from 53.8, its lowest since early 2021.
Inflation has remained stubbornly high in the bloc despite aggressive tightening of monetary policy.
The ECB raised interest rates for the ninth consecutive time last week but raised the possibility of a pause in September as inflation pressures show tentative signs of easing and recession worries mount.
(Reporting by Jonathan Cable; Editing by Toby Chopra)
