XM Group - Analytics

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    Eurozone PMI points to slow start to third quarter

    The Markit flash PMI for manufacturing and services activity in the Eurozone showed continued expansion in July. However, the strong momentum seen in the second quarter appears to be waning at the start of the third quarter.

    Eurozone flash manufacturing PMI fell to 52.2 in July from 52.5 in June, against expectations that it would stay unchanged. Services PMI was also lower, dropping from 54.4 to 53.8, versus forecast of 54.2. The figures are still comfortably above 50 though, indicating expansion, but at a slower rate. The composite PMI came in at 53.7, down from June’s 54.2.

    In Germany, the Eurozone’s largest economy, the service sector outperformed the manufacturing sector as a result of stronger new orders. German manufacturers saw lower new export business for the first time since January. But activity in both sectors continued to expand with manufacturing PMI easing to 51.5 and services PMI to 53.7.

    Activity in France declined more notable in July as manufacturing PMI fell below 50 to 49.6 for the first time since April. Services PMI performed better though at 52.0 but this was slower than June’s 54.1. French manufacturers suffered a decline in new orders, while service providers saw a slower rise in new orders in July.

    In the rest of the Eurozone, growth was more robust than in Germany and France with activity expanding at a faster pace. But overall in the euro area, growth in new business was the slowest since February. Jobs growth also appeared to be easing, with manufacturing jobs rising faster than services sector jobs. There were signs that the Greek crisis had some negative impact on German and French business expectations for the year ahead as the talks breakdown between Greece and its creditors reached its heights during the survey period.

    The euro fell against the dollar after the data. It came close to breaking the 1.10 handle earlier in the day but dropped to around 1.0940 by mid-European session. It was also weaker against the yen as it fell to 135.68 from an earlier high of 136.20. The single currency was a bit more resilient against the pound, falling slightly to 0.7068.

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