Eurozone economic growth rebounded in July, according to the „flash‟ estimate of Markit‟s Purchasing Managers‟ Index. The headline PMI, covering business activity across both manufacturing and services, rose from a six-month low of 52.8 in June to 54.0 in July. The latest reading matched the near-three year high seen back in April and exceeded the averages seen in the first two quarters of the year.
Many companies reported that business had picked up again in July after an unusually high number of holidays and a knock-on effect of mild winter weather had depressed activity in prior months.
However, growth of new orders slowed slightly in July amid signs that expansion, especially in manufacturing, is being subdued by geopolitical concerns, in particular the escalating crisis in Ukraine.
While growth of service sector business activity accelerated to the fastest for just over three years, growth of output and new export orders in the manufacturing sector picked up only marginally, remaining well below the rates seen earlier in the year.
A lack of clarity on the economic outlook, as well as ongoing pressure to cut costs and boost competitiveness, meant employment rose only marginally once again in both sectors in July. While weak though, the continuous trend of moderate job creation seen over the past four months represents an improvement from the significant pace of job losses being recorded this time last year.
Output prices meanwhile continued to fall, with the rate of decline accelerating slightly on June. Average selling prices have now fallen continually since April 2012, although the rate of decline remains only modest and far weaker than that seen at the height of the financial crisis. A marginal rise in manufacturing factory gate prices was offset by a drop in charges levied for services.
Some rising cost pressures were evident. Average input prices in manufacturing rose for a second successive month, growing at the steepest rate for seven months, while service sector input costs also rose, albeit to a slightly lesser extent than June.
Looking at the data by country, strong national divergences persisted, with France contracting while growth accelerated elsewhere. Firms in France reported that output fell for a third month running after the brief return to growth seen in the spring. Although French service providers saw a marginal return to growth, output in the manufacturing sector fell at the steepest rate since April 2013.
Firms in Germany, in contrast, reported the strongest increase in business activity since April, with growth picking up sharply from the lull seen in June. Service sector activity picked up especially markedly, growing at the fastest rate for over three years. Manufacturing output growth also revived in Germany, but remained much weaker than earlier in the year.
Outside of France and Germany, the rest of the region recorded the largest monthly increase in business activity since August 2007. New orders also grew at the sharpest rate for seven years. Although manufacturers outside of France and Germany saw output growth moderate slightly, the pace of expansion in services hit a seven-year high.
