Eurozone growth slips in July as manufacturing decline accelerates

Author: Tom Brown

2019/08/05

LONDON (ICIS)--Eurozone private sector growth slowed closer to a standstill in July on the back of continuing deterioration in manufacturing sector output, according to data from IHS Markit on Monday.

The eurozone composite purchasing managers’ index (PMI) slipped to 51.5 in July compared to 52.2 in June, as solid if slightly slower service sector growth struggles against the sharpest month on month drop in manufacturing sector activity since April 2013.

A PMI score of 50.1 or higher indicates expansion.

The sixth consecutive month of manufacturing sector weakness saw Germany’s composite PMI slip to 50.9 from flash estimates of 51.4 as bearish industrial output almost completely offset service sector growth.

Other key eurozone economies, France, Spain and Italy generated PMI scores of 51.9, 51.7 and 51.0 respectively.

“The service sector continued to sustain the expansion of the overall eurozone economy at the start of the third quarter, but there are signs that the scale of the manufacturing downturn is starting to overwhelm,” said Markit chief business economist Chris Williamson.

Weak demand continued to weigh on eurozone growth, with manufacturing order book levels declining markedly during the period. Employment rose month on month despite the sluggish conditions but the rise was the weakest in more than a year.

Business confidence slipped to its lowest levels in five years, with firms in Germany the least optimistic about business activity over the next 12 months.

The overall pace of economic expansion indicated by the PMI data hints that GDP growth has slipped closer to 0.1% during the month, according to Williamson.

““Trade war worries, slower economic growth, falling demand for business equipment, slumping auto sales and geopolitical concerns such as Brexit led the list of business woes, dragging manufacturing production lower at its fastest rate for over six years,” he said.

“There are signs that [consumer demand] is also losing impetus… adding another headwind to the economy for the coming months,” he added.

Pictured: A car production plant in Germany
Source: Stephan Goerlich/imageBROKER/Shutterstock