Eurozone business activity rebounded to a five-month high in July, with the flash composite PMI climbing back above 50 as manufacturing posted its strongest output growth since 2022. Cooling cost pressures ease the case for further ECB tightening, though the Middle East conflict clouds the outlook.
The eurozone private sector returned to growth in July for the first time in four months, as the flash composite PMI rose to 51.9 from 50.0, a five-month high. The reading beat the 50.3 expected by economists and lifted the index back above the 50 mark that separates expansion from contraction.
Manufacturing leads the rebound
Manufacturing did the heavy lifting. The Manufacturing Output Index climbed to 53.0 from 51.7, its strongest since March 2022. The headline Manufacturing PMI rose to 52.0 from 51.4, a three-month high. Services also turned the corner, with the business activity index rising to 51.6 from 49.4 after three straight months of contraction.
Demand fed the improvement. New orders rose for the first time in five months, growing at the fastest pace since April 2023. Firms responded by hiring, delivering the first increase in eurozone employment in 2026, though job creation stayed marginal.
Germany rejoins the expansion
The recovery broadened across the region. Germany returned to growth for the first time in four months, its composite PMI reaching 51.2 from 49.5, with manufacturing output hitting its highest level in more than four years. France’s composite PMI improved to 49.6 from 47.2, still below 50 but a marked easing of the downturn. S&P Global described a welcome revival of activity: “July is seeing a welcome revival of economic activity in the eurozone.”
Cooling prices ease the ECB’s hand
The survey carried better news on inflation too. Input cost pressures fell to their lowest since February, moderating selling-price gains across goods and services. That eases the case for further rate hikes from the ECB.
Still, the outlook hinges on the Middle East, where rising oil prices and escalating shipping disruptions could quickly revive price pressures and threaten the fragile recovery.
Sources: ActionForex, Investing.com, investingLive
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