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Financial News: Eurozone Private Sector Growth Weakens On Factory Downturn

Eurozone Private Sector Growth Weakens On Factory Downturn

07/24/2019 - 06:51:00 (RTTNews)

(RTTNews) - Euro area private sector expansion weakened in July, driven by a deepening manufacturing downturn and a slight moderation in service sector growth, data from IHS Markit showed Wednesday.

The flash composite output index fell to 51.5 in July from 52.2 in June. The reading was also below forecast of 52.1, but the score above 50 indicates expansion.

July's composite indicator masked a widening divergence between the manufacturing and service sectors to the largest since April 2009.

The service sector growth slowed from June, while manufacturing reported the steepest fall in production since April 2013.

The services Purchasing Managers' Index slid to 53.3 in July from 53.6 in the previous month. Economists had forecast the indicator to fall to 53.3.

The manufacturing PMI declined to a 79-month low of 46.4, while it was forecast to remain unchanged at 47.6.

The pace of GDP growth looks set to weaken from the 0.2 percent rate indicated for the second quarter closer to 0.1 percent in the third quarter, Chris Williamson, chief business economist at IHS Markit, said.

"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," Williamson added.

The ECB will start further loosening by changing their forward guidance on interest rates and QE tomorrow, before cutting the deposit rate in September and re-launching QE in November, Jack Allen-Reynolds, an economist at Capital Economics, said.

Among major member countries, moderate rates of growth were seen in Germany, France and the rest of the region as a whole.

Germany's private sector grew at the slowest pace in four months in July as manufacturers recorded their worst monthly performance in seven years.

The flash composite PMI fell to 51.4 in July from 52.6 in June. Economists had forecast a score of 52.3.

The services PMI decreased to 55.4 in July from 55.8 in the preceding month, but above the forecast of 55.2.

The manufacturing PMI dropped to 43.1 in July from 45.0 in the previous month. Economists had forecast a score of 45.2.

France's moderate growth was driven by the service sector, while manufacturing output slipped back into contraction territory.

The composite output index fell to 51.7 in July from 52.7 in June. The score was forecast to drop to 52.5.

The services PMI came in at 52.2 in July, down from 52.9 a month ago. Economists had forecast the indicator to drop to 52.8.

At the same time, the factory PMI declined to the neutral 50.0 from 51.9 in the previous month. The expected score was 51.6.

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