Economic Buzz: Eurozone business activity contracts for third straight month in June

Flash PMI data from S&P Global showed that business activity across the eurozone continued to decline in June, marking the third consecutive month of contraction, although the pace of decline eased compared with May.

The S&P Global Flash Eurozone Composite PMI Output Index rose to 49.5 in June from 48.5 in May but remained below the 50.0 no-change level, indicating a further fall in private sector activity. However, the latest contraction was the mildest in the current three-month downturn.

Services activity continued to decline but at a slower pace, while manufacturing production expanded modestly. Among the region?s largest economies, both Germany and France recorded declines in output. Germany posted its sharpest contraction in one-and-a-half years, while the rate of decline in France eased. In contrast, the rest of the euro area recorded modest growth, the strongest since the start of the year.

New business fell for the fourth consecutive month, although the decline was the slowest since March. A slight increase in manufacturing orders was not enough to offset continued weakness in the services sector.

Inflationary pressures showed signs of easing. Input cost inflation slowed to its weakest level since February, before the outbreak of the Middle East conflict, while output price inflation eased to a three-month low. Cost pressures moderated across Germany, France and the wider eurozone.

Manufacturers continued to report significant delays in supplier deliveries, although disruptions were less severe than in previous months. Purchasing activity was broadly unchanged, ending a three-month period of growth, while inventories of inputs and finished goods declined.

Employment was close to stabilising in June, with workforce numbers falling only marginally and at the slowest pace since February. However, the eurozone private sector has now gone six consecutive months without net job growth. Manufacturing employment continued to decline, while services firms recorded a slight increase in hiring.

Business confidence improved for the second month in a row after falling to a 31-month low in April. While optimism remained relatively subdued, sentiment strengthened in both manufacturing and services, supported by improved confidence in France and other eurozone economies.

Most survey responses used for the June flash PMI were collected before the June 17 memorandum of understanding between the US and Iran aimed at ending hostilities.

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