business activity in the eurozone is declining faster than experts expected

[ad_1]

Business activity in the euro area continues to decline – and faster than expected by experts. According to preliminary estimates by S&P Global, in July, the composite PMI index (a leading indicator of GDP dynamics) fell to an eight-month low, amounting to 48.9 points after 49.9 points in June. Analysts had expected a less serious decline – to 49.7 points. Recall that the indicator value above 50 points indicates an increase in activity, below it indicates its contraction.

The service sector index, remaining in the positive zone, in July fell to the lowest level since January of this year at 51.1 points (52 points a month earlier, the forecast was – 51.5). The indicator of activity in the industry has completely decreased to a three-year low, amounting to 42.7 points (43.4 points a month earlier, the forecast was 43.5). The decline is explained by weakening demand and a reduction in export orders (including due to a slower-than-expected recovery of the Chinese economy – see Kommersant on July 18 for more details).

According to preliminary estimates, the most serious decline in business activity in July was in the largest economies – in Germany and France. Composite PMI in Germany fell to 48.3 from 50.6 in June. The index in the service sector fell to 52 points from 54.1 points in June, in industry against the backdrop of a reduction in orders – to 38 points (a minimum for more than three years) from 40.6 points in June. In France, overall business activity fell to 46.6 points, a two-and-a-half-year low, from 47.2 in June. PMI in the services sector fell to 47.4 points from 48 points a month earlier, in the industry – to 44.5 points (minimum for more than three years) from 46 points in June.

Experts at Oxford Economics point to increased risks of a contraction in the euro area’s GDP in the third quarter. S&P Global expects that, despite a slowdown in business activity and some easing of inflationary pressure on prices, at this Thursday meeting the ECB will continue to tighten monetary policy and, as planned (for more details, see Kommersant on May 5), will raise key rates by 25 basis points. It should be noted that a reversal in the policy of the regulator is possible only in case of a significant deterioration in economic conditions, which, despite the subsidence of some indicators, has not yet occurred.

Christina Borovikova

Leave a Reply

Your email address will not be published. Required fields are marked *