The drop in business activity in the euro zone is accelerating. The composite PMI index – a thermometer that measures sales, orders, occupation, stocks or deliveries and anticipates the progress of the economy – fell in July to 48.6 points from the previous 49.9. For the second month in a row, it is below 50, indicating a contraction.
The “ever deeper” slowdown in industrial activity and “an almost total stagnation of activity in the service sector” explain the lowest levels in eight months. It also affects a drop in new orders and exports. “The second half of the year has gotten off to a bad start for the euro zone economy,” warned Cyrus de la Rubia, chief economist at the Hamburg Commercial Bank, which prepares the survey of 5,000 companies together with S
“The drop in activity is driven by the manufacturing sector, but growth in services has also moderated, reducing support for the economy,” adds De la Rubia.
The pull in employment slows down and leaves business confidence weakened. In the absence of new orders, companies take the opportunity to clear backlogs, which reduces pending orders for the fourth month in a row. As the workload is less, the need to hire is reduced. In Spain, the latest employment figures from the EPA left a hole in the industry, with 64,500 jobs lost.
“Both manufacturers and service companies were less optimistic about the outlook for the next twelve months,” it says in a note. “Employment growth will stop in the coming months given the gloomier prospects for the economy,” De la Rubia predicted.
France is the worst positioned, with an index of 46.6 points, the lowest in almost three years, compared to Germany’s 48.5 points, the worst data in 8 months. Italy is also in the contraction zone with 48.9 points, while Ireland is in the neutral zone with 50 points and Spain looks to expansion with 51.7.
