MNI 5 THINGS: Eurozone Composite PMI Starts Q3 On Softer Note

--IHS Markit July Composite PMI Falls To 54.9 Vs June 54.3

     LONDON (MNI) - The final July reading of the Eurozone composite PMI was

released on Friday, with the index dropping from 54.9 in June to 54.3. While the

manufacturing PMI saw a small uptick in July (to 55.1 from June's 18-month low

of 54.9), the services PMI moved a whole point lower to 54.2.

     Here are five things we learned from the release.

     1. Eurozone Economic Growth Moderation Driven by Services: Whilst the

Eurozone Services PMI hit a four-month high in June, July's reading of 54.2 was

the second-lowest during the last 18 months. The reasons cited for the slowdown

were an easing in the growth of new orders and a drop in business confidence to

its lowest level since November 2016.

     2. Spain's Output Expansion at 56-Month Low: National PMI data pointed to a

broad-based expansion of economic output. Whilst growth was registered in all

the countries covered by the survey, Spain's rate of increase was at a 56-month

low, compared to Germany's 4-month high. Meanwhile, although the Composite PMI

readings for both France and Italy were at two-month lows in July, they followed

a strong June.

     3. Employment Remains Strong in the Eurozone: Employment increased again in

July, with the rate of job creation solid, but slower than in June. Marked

increases were registered across Germany, France, Spain and Ireland. However,

whilst services sector employment increased for the forty-fifth successive month

in July, part of the expansion was due to rising backlogs of work, rather than a

robust increase in new orders.

     4. Price Pressures Ease but Remain Elevated -- Especially in Services:

Rates of inflation in output charges and input costs remained above their

respective long-run averages in July, despite easing. Rising fuel and other

oil-related costs were cited as a primary driver of the upward pressure on input

prices -- and many companies passed this onto their clients. The services sector

also had to contend with increased staff costs. Consequently, selling prices

increased in Germany, France, Spain and Ireland.

     5. July pointing to Muted Q3 Growth in Line With Q2: The July PMI data

suggests that quarterly GDP growth could be little changed from the

lower-than-expected growth rate of 0.3% in Q2 -- when the Composite PMI had

signalled a healthier 0.5% q/q growth expansion. "The final PMI numbers confirm

the Euro Area economy started quarter three on a softer footing. July saw rates

of expansion in both output and new orders cede the momentum recaptured in the

prior survey month," said Chris Williamson, Chief Business Economist at IHS

Markit.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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