The latest PMI data showed the rate of expansion in eurozone economic activity slowing slightly at the start of the third quarter. However, growth remained close to June’s four-year high, with the extent of the easing less marked than that signalled by the earlier flash estimate.
The final Markit Eurozone PMI® Composite Output Index posted 53.9 in July, down from 54.2 in June and above the earlier flash estimate of 53.7. Solid expansions of output were signalled in both the manufacturing and service sectors, with the slightly faster rate of growth at service providers.
Spain registered the best rate of economic growth of the ‘big-four’ eurozone nations, with the pace of expansion moving back towards April’s 101-month record. Growth in Germany remained solid and steady, whereas decelerations were signalled in both France and Italy.
Underpinning the latest rise in eurozone economic activity were improved inflows of new business, higher employment and rising levels of outstanding business. Although growth of new work received was unchanged from June’s four-month low, it was still above the average for the current sequence of expansion that started in December 2014.
Jobs growth was registered for the ninth consecutive month in July, albeit the weakest since February. Broadly similar rates of increase were signalled at
manufacturers and service providers alike.
The current sequence of job creation is the longest achieved since 2011. Germany, Italy and Spain all reported higher employment, with the rates of increase accelerating in Germany (five-month high) and Spain (100-month record). Jobs growth in Italy was only marginal and the least marked since February, while cuts were seen in France following a four-month sequence of rising employee headcounts.
On the price front, the July surveys provided some positive news on the prospects of a moderate upturn in inflationary pressures. Selling prices were only
fractionally lower over the month, suggesting a possible near-term end to a sustained period of decreases. Input prices also continued to rise, reflecting rising wages and the weakening euro exchange rate.
The eurozone service sector continued to expand at a solid pace at the start of the third quarter. Business activity rose at a pace close to June’s four-year record, as the growth rate of new business remained among the fastest seen since mid-2011 and further job creation was registered.
The Eurozone Services Business Activity Index edged down to 54.0 in July, from 54.4 in June, but above the earlier flash estimate of 53.8. The headline index has now signalled expansion throughout the past two years.
Output increased across the big-four national service sectors in July. By far the sharpest rate of expansion was in Spain, where activity rose at the second-fastest pace since November 2006 (bettered only during that period by April 2015). Growth in Germany held steady and was slightly above the second quarter average.
In contrast, rates of output expansion slowed in both France and Italy, to three- and four-month lows respectively. Meanwhile, new order inflows strengthened in Germany, Italy and Spain, but slowed in France.
Job creation was registered in the eurozone service sector for the ninth straight month in July. Although the rate of increase was the slowest since January, it was still broadly in line with the average for the current sequence of jobs growth. Germany and Spain registered solid and accelerated increases in employee numbers, whereas cuts were seen in France and Italy following rises in recent months.
The latest increase in employment reflected the ongoing upturn in the sector, rising backlogs of work and expectations of future output growth. Although business optimism dipped to a seven-month low, it was broadly in line with the average for the current recovery in services output. Sentiment improved in Italy and Spain, but dipped in France and Germany.
Average cost burdens at eurozone service providers increased for the sixty-eighth consecutive month in July. In contrast, average selling prices fell for the forty-fourth straight month, albeit only marginally and to one of the weakest extents during that sequence.