Euro Zone Business Activity Rebounds with Highest Reading in Five Months

The Euro zone business activity has returned to growth in July for the first time in four months. According to the S&P Global Flash Euro zone Composite PMI Output Index, which rose to 51.9 in July from June's 50.0, a reading above 50.0 signals an expansion in activity.

The index's highest reading in five months is attributed to a rebound in new orders, with the pace of expansion being the fastest since April 2023. Export orders continued to decline but at a slower rate than previously seen, with the least pronounced decrease since March 2022.

Both manufacturing and services contributed to the output rebound, with services recovering to a five-month high of 51.6, up from 49.4 in June.

Henry Chambers at Capital Economics commented on the rise in euro zone Composite PMI, saying that while it suggests activity is rebounding and inflationary pressures are easing, the improvements may be short-lived due to re-escalation in conflict in the Middle East and subsequent rise in energy prices.