Eurozone PMI manufacturing dropped to 46.4 in July, down from 47.6 and missed expectation of 47.6. That’s also the lowest level in 79 months. PMI services dropped to 53.3, down from 53.6, matched expectations. PMI Composite dropped to 51.5, down from 52.2, a 3-month low.
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“The eurozone economy relapsed in July, with the PMI giving up the gains seen in May and June to signal one of the weakest expansions seen over the past six years. The pace of GDP growth looks set to weaken from the 0.2% rate indicated for the second quarter closer to 0.1% in the third quarter.
“The manufacturing sector has become an increasing cause for concern. Geopolitical worries, Brexit, growing trade frictions and the deteriorating performance of the autos sector in particular has pushed manufacturing into a deeper downturn with the survey indicative of the goods-producing sector contracting at a quarterly rate of approximately 1%.
“The more domestically-focused service sector remained the main driver of expansion, though even here the rate of growth has slowed, likely in part due to signs of weaker labour market trends. Hiring was close to a three-year low in July.
“Germany has been especially hard hit by the manufacturing and autos sector downturns, and is at risk of GDP contracting marginally in the third quarter. France appears more robust, albeit with growth likely to ease slightly from 0.3% to 0.25% in the third quarter.
“With growth slowing, job creation fading and price pressures having fallen markedly compared to earlier in the year, the survey will give added impetus to calls for more aggressive stimulus from the ECB.”
