Eurozone Private Sector Stagnates In June

(RTTNews) - Euro area private sector activity stalled in June amid the deepening downturn in manufacturing and the slowdown in services activity, final data from S&P Global showed on Wednesday.

The final HCOB composite output index dropped more-than-estimated to 49.9 in June, as estimated, from 52.8 in May. The flash reading was 50.3.

A score below 50.0 indicates contraction in the private sector.

The survey highlighted the divergence between the performance of manufacturing and services activities. The downturn in manufacturing deepened in June, while services sector continued to expand, albeit at a softer pace.

The services Purchasing Managers' Index, or PMI, fell to a five-month low of 52.0 from 55.1 in May. The reading was below the initial score of 52.4.

At the composite level, the growth was restrained by falling new orders. Demand weakened for the first time since January. There was a sharp decline in sales to non-domestic clients in both sectors.

Backlogs of work decreased for the third straight month and the rate of depletion quickened. Outstanding business in services almost stagnated, while manufacturers reported the steepest decrease in more than three years.

Further, firms continued to ramp up staffing, but job growth was confined to the services sector as factory employment dropped for the first time since January 2021.

Although firms were optimistic regarding the coming twelve months, the level slipped to the lowest level seen so far this year.

On the price front, the survey showed that input cost inflation in services dropped to a two-and-a-half year low, while input prices in manufacturing slid the most since July 2009.

At the same time, firms continued to lift their charges in June but at the slowest pace since March 2021. Manufacturers reduced their selling prices in the face of intensifying competition and falling cost. On the other hand, output price inflation hit a 20-month low in the services sector.

Among big-four economies, Spain and Germany continued to expand despite the pace of growth slowing to a 5-month low. Meanwhile, Italy and France slipped into the contraction territory.

Reflecting the drag from manufacturing, the German private sector PMI declined sharply to 50.6 from 53.9 in May. The flash score was 50.8. The services measure posted 54.1, which was well below May's 57.2, to match the flash estimate.

France's private sector entered the contraction zone in June as services activity weakened. The composite output index registered 47.2 in June, down from 51.2 in May. The reading was below the 50.0 mark for the first time since the start of the year. The flash score was 47.3.

The services PMI fell to 48.0 in June, in line with the initial estimate, from 52.5 in May.

Italy's private sector shrunk in June as the decline in manufacturing more than offset the moderate growth in services. The composite output index fell to 49.7 from 52.0 in the previous month. The services PMI registered 52.2, down from 54.0 in May.

The PMI survey suggested that the growth in the Spanish service sector was gradually losing momentum. The HCOB services PMI fell to 53.4 in June from 56.7 in the previous month.

The overall private sector grew at the slowest pace since January. The composite output index posted 52.6 in June, down from 55.2 in May.