Euro zone business activity contracts in June -PMI By Reuters

Euro zone business activity contracts in June -PMI By Reuters

© Reuters. FILE PHOTO: The headquarters of the European Central Bank (ECB) and the Frankfurt skyline with its financial district are photographed on early evening in Frankfurt, Germany, March 25, 2018. REUTERS/Kai Pfaffenbach

LONDON (Reuters) – Euro zone business activity slipped into contractionary territory last month in a broad-based downturn across the bloc’s dominant services industry and a deepening decline of factory output, a survey showed.

HCOB’s final Composite Purchasing Managers’ Index (PMI), compiled by S&P Global (NYSE:) and seen as a good gauge of overall economic health, slumped to 49.9 in June from May’s 52.8.

That was below the 50 mark separating growth from contraction for the first time since December and shy of a preliminary estimate for 50.3.

A sister survey released on Monday showed manufacturing activity contracted faster than initially thought and Wednesday’s final PMI covering the services industry dropped to 52.0 from 55.1, lower than the 52.4 flash reading.

“All major euro countries have again lost considerable momentum. The slowdown in business activity growth was accompanied by a weaker rise in new business, lower price increases and a decline in business expectations,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

The services new business index was barely above breakeven at a five-month low of 51.0. The preliminary reading was 51.3 and in May it was 53.3.

In one bright spot pricing pressures eased significantly in June with the composite output prices index falling to 53.8 from 56.4, its lowest since March 2021.

That will likely be welcomed by policymakers at the European Central Bank who have failed to get inflation anywhere near their 2% target despite tightening monetary policy aggressively.

They raised borrowing costs to their highest level in 22 years last month and said stubbornly high inflation all but guaranteed another move on July 27 and likely beyond that too.

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