Eurozone business activity shrank slightly in July for the first time since the start of last year as consumers cut back on spending amid rising living costs, according to a survey that suggested the outlook for the economy is bleak.
S&P Global’s composite PMI fell to a 17-month low of 49.9 points in July from 52 points in June, although it remained above preliminary estimates of 49.4 points.
“The eurozone’s economic outlook has worsened at the start of the third quarter, with the latest survey data pointing to a contraction in GDP in July,” said Chris Williamson, chief economist at S&P Global.
“Rising inflation, rising interest rates and worries about supplies – mainly energy – have driven output and demand to their biggest declines in a decade, not including the quarantine months.”
Although price increases moderated, they remained high and the new business index fell to 47.6 out of 50, the lowest level since November 2020.
The PMI covering the services sector fell to 51.2 from 53, although it was higher than estimates of 50.6.
Demand for services fell as consumers stayed home and businesses were less optimistic.
The business confidence index fell to 56.8 from 58.5, the lowest level since October 2020, when the region was at the center of the coronavirus pandemic.
“A much-anticipated pick-up in consumer spending after the easing of pandemic measures is not coming as households become increasingly concerned about rising living costs, meaning discretionary spending is limited to the basics,” Williamson added.
Source: Capital
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