Eurozone: PMI declined to 51.5 in July - ING

Bert Colijn, senior economist at ING, notes that the Eurozone PMI declined from 52.2 to 51.5 in July, supported by the deepening manufacturing contraction.

Key Quotes

“The economy is still growing, but the pace remains weak in the third quarter. With manufacturing dropping sharply according to the PMI (drop from 48.5 to 47), concerns about the growth environment remain significant.”

“Even though service sector activity remains strong for now, the question is how long that can be maintained when industrial production experiences a prolonged decline.”

“The PMI indicates weakness in employment growth though, with manufacturing employment in Germany dropping sharply according to the indicator and falling for the third month in a row for the Eurozone as a whole. That foreshadows moderation in the service sector, making a swift recovery of growth unlikely.”

“Finally, the PMI signals a weakening inflation outlook with easing input prices on the industrial side. This has its impact on selling prices as businesses indicate slower inflation from both the industry and service sector side. As inflation pressures decline, the inflation outlook seems to be weakening if anything at the moment.”

“All in all, the PMI paints a picture of an economy that is flirting more with the downside than with swift recovery.”