Eurozone Business Activity Hits Five-Month High in July

Eurozone business activity returned to expansion in July, with the Composite Purchasing Managers’ Index (PMI) rising to 51.9 from 50.0 in June. This represents a five-month high and exceeds economist expectations. The growth was driven by a rebound in new orders and contributions from both sectors; the Manufacturing Output Index reached 53.0, its strongest level since March 2022, while the Services PMI climbed to 51.6.

Regional data indicates that Germany returned to growth after three months of contraction, with its Composite PMI rising to 51.2. In France, the economic downturn moderated to its weakest level since February, reaching a Composite PMI of 49.6. S&P Global noted that stronger demand led to the first employment increase of the year and improved business confidence.

S&P Global Market Intelligence reports that while cooling input costs may reduce the need for the European Central Bank to tighten policy further, significant risks remain. The European Central Bank maintained borrowing costs at 2.25% on July 23, though some officials remain prepared to raise rates in September. Chief Business Economist Chris Williamson warned that military attacks and stalled peace talks between Washington and Tehran regarding the Middle East, alongside rising oil prices and shipping worries, could trigger an economic relapse if inflationary pressures intensify.