Business activity unexpectedly contracted in the eurozone in July as surging costs saw consumers retrench their spending, a survey released on Friday revealed.
The S&P Global flash Composite Purchasing Managers’ Index (PMI) fell to 49.4 in July from 52.0 in June, the lowest since February 2021. A reading below 50 indicates a contraction.
“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,” said Chris Williamson, chief business economist at S&P Global.
“Excluding pandemic lockdown months, July’s contraction is the first signalled by the PMI since June 2013, indicative of the economy contracting at a 0.1% quarterly rate.”
The services industry PMI fell to a 15-month low of 50.6 in July from 53.0, while the services new business index fell to 48.4 from 51.8 as spending was reined in.
Manufacturing activity fell in July for the first time in more than two years with the factory PMI slumping to 49.6 from 52.1.
Indications that sentiment was turning sour in manufacturing was revealed by a fall in the future output index fell to 49.7 from 51.5.
“Business expectations for the year ahead have meanwhile fallen to a level rarely seen over the past decade as concerns grow about the economic outlook, fuelled in part by rising worries over energy supply and inflation but also reflecting tighter financial conditions,” Williamson said.