Inflationary pressures showed signs of easing in the eurozone in June, reducing pressure on the private sector, according to the latest flash Purchasing Managers’ Index (PMI) from S&P Global.
Business output continued to fall across the eurozone, amid ‘sustained falls’ in new orders, albeit at its slowest pace for three months, the index showed.
The Flash Eurozone Composite PMI Output Index rose to 49.5 in June from 48.5 in May, reaching a three-month high but remaining below the 50-point threshold.
Elsewhere, the services sector continued to contract but showed signs of improvement, with the Services PMI Business Activity Index rising to 48.9 from 47.7 in May. Manufacturing remained comparatively resilient, with output continuing to expand modestly despite the Manufacturing PMI easing to 51.3 from 51.6, its lowest level in four months.
‘Enough resilience’
“The eurozone economy is showing enough resilience to just about stay out of recession,” commented Chris Williamson, chief business economist at S&P Global Market Intelligence. “The flash PMI registered only a slight drop in business activity in June, meaning the survey is indicative of unchanged GDP over the second quarter.”
Overall demand remained subdued, with new business declining for a fourth successive month, although the pace of contraction was the weakest since March. Manufacturing recorded a marginal increase in new orders, but this was outweighed by continued weakness in the services sector.
Employment remained under pressure, although job losses slowed considerably. Staffing levels declined only fractionally during June, marking the smallest fall since February. Manufacturing companies continued to reduce headcount, while service providers recorded a modest increase in employment.
Inflationary pressure
Inflationary pressures also eased during the month. Input costs rose at their slowest pace since before the outbreak of the Middle East conflict, helped by lower energy prices, while the rate of output price inflation also moderated to a three-month low. Manufacturing firms continued to report stronger cost and selling price inflation than service providers.
Supply chains remained under strain, with manufacturers reporting further delays in supplier deliveries, although these disruptions were less severe than in previous months. Purchasing activity stabilised after three months of expansion, while inventories of both purchased inputs and finished goods declined.
‘Welcome news’
“There is welcome news of an easing in the recent downturn in services activity, with tourism and leisure related industries seeing signs of recovering demand after the initial disruptions from the war in the Middle East.
“Manufacturing, meanwhile, continues to benefit from inventory building as customers front-run future prices rises or supply issues amid ongoing supply fears linked to the war. However, although widespread supply chain delays contributed to further upward pressure on prices, there are signs that concerns over supply and price trends are starting to moderate.
“Encouragingly, lower energy prices are already filtering through to businesses and rates of input cost and selling price inflation have moved lower in June as a result, hinting at a potential peaking of the recent price spike.” Read more here.
