Global Courant
New PMI data fell short of expectations and pointed to an economic slowdown.
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Business activity growth in Europe slowed in June, pointing to a difficult end to the second quarter, according to preliminary data released Friday.
The Eurozone’s flash composite Purchasing Managers’ Index fell from 52.8 in the previous month to 50.3 in June. This was lower than the 52.5 expected by analysts. A value above 50 indicates an increase in activity, while a value below 50 indicates a contraction.
“Eurozone business output growth came to a near halt in June, according to the latest HCOB flash PMI survey data from S&P Global, pointing to renewed weakness in the economy after the brief growth pick-up in the spring,” S&P Global said in a statement. a press release. .
“While concerns about the energy and supply chain have eased since late last year, June saw a further escalation of concerns about demand growth, and in particular the impact of higher interest rates and the resulting possibilities of recessions, both in the domestic markets as well as abroad.”
Speaking to CNBC’s Street Signs Europe, Chris Williamson, chief business economist at S&P Global Market Intelligence, described the numbers as “worrying.”
“Higher interest rates, the rise in the cost of living are all starting to take their toll,” he said.
The European Central Bank has consistently raised interest rates over the past 12 months in an effort to curb inflation. However, higher rates can lead to higher costs for businesses across the bloc, often acting as a drag on output.
Country-by-country data earlier in the day also from Germany that there was a slowdown in Europe’s largest economy. German flash composite PMIs fell from 53.9 in May to 50.8 in June. This was below market expectations.
“These data are consistent with our view that GDP (gross domestic product) growth in Germany will remain subdued in the second and third quarters after the economy has entered a technical recession,” said Claus Vistesen, chief Eurozone economist at Pantheon. Macro economy. to customers.
Germany entered a technical recession in the first quarter of the year, after contracting by 0.3% over a three-month period. In the last quarter of 2022, the German economy contracted by 0.5%.
It was a similar story in France, where the composite PMI fell from 51.2 in May to 47.3, well below the expected 51. This was mainly due to weakness in the services sector.
Eurozone bond yields fell following the release of German and French data. An economic slowdown is generally negative for bond yields. The yield on the 2-year German bund fell 6.5 basis points to 3.21%.
