Eurozone hits eight-month high as services return to growth

Eurozone business activity expanded at its fastest pace in eight months in July as a rebound in services joined a strengthening manufacturing sector, according to final survey data published on Wednesday. The recovery, however, remains overshadowed by the ongoing conflict in the Middle East.

Services Revival Powers Broad-Based Recovery

The S&P Global Eurozone Composite PMI rose to 52.0 in July from the neutral 50.0 mark in June, slightly above the preliminary estimate of 51.9 and marking the first expansion since March. The Services PMI climbed to a five-month high of 51.7 from 49.4, signalling the sector's first return to growth in four months.reuters+2

"July's final PMI adds to a picture of encouraging resilience of the euro zone economy amid the ongoing conflict in the Middle East, but also underscores how the business climate is being steered by the changing geopolitical landscape," said Chris Williamson, chief business economist at S&P Global Market Intelligence.economictimes+1

New orders rose at their fastest pace since November, driven by rebounding services demand and a slight pick-up in factory order growth. Manufacturing also contributed, with the factory PMI rising to 51.9 from June's 51.4, its highest level since April. Employment stabilised after six consecutive months of job losses.wtvbam+1

Country Divergence Narrows

The improvement was broad-based across the bloc. Germany's composite PMI returned to expansion at 51.3 after three months of contraction, while Spain posted its best performance in more than a year and a half. Italy's services PMI jumped to 52.5, well above expectations of 51.3. France remained the sole major economy in contraction, though conditions improved notably, with its composite reading rising to 49.4 from 47.2.actionforex+2

Inflation Eases but ECB Hike Looms

Input cost inflation fell to a five-month low while output price inflation eased to its softest since March, offering some relief to consumers and policymakers. S&P Global said the survey is consistent with around 0.3% quarterly GDP growth.reuters+1

Yet headwinds persist. Eurozone inflation ticked up to 2.9% in July from 2.8% the previous month, reinforcing expectations that the European Central Bank will raise its deposit rate again in September. Business confidence, while at a five-month high, remains below levels seen before the U.S.-Israeli attack on Iran in late February — a reminder that geopolitical uncertainty continues to weigh on the bloc's recovery prospects.economictimes+1