Eurozone Growth Defies Stagflation Fears Despite PMI Resilience

The Eurozone's economic growth has defied gloomy predictions, with PMI readings exceeding expectations. The composite PMI rose to an eight-month high of 52.0 in July, surpassing June's reading of 50.0. This uptick is largely attributed to a resurgence in services sector activity, with the services PMI rebounding into expansion territory at 51.7 from 49.4.

Germany, Italy, and Spain have all reported improvements in their respective services PMIs, while France remains in contraction. The survey also noted a slowdown in inflationary pressures, as input costs and output charges eased further.

BNY's Geoff Yu emphasizes that these positive readings do not necessarily signal another rate hike from the ECB. In fact, he warns that additional tightening could risk turning a nascent recovery into a policy-driven slowdown for the Eurozone and its regional assets.