Markit reported this morning the Eurozone PMI Composite Output Index was unchanged at 46.4 in July as the private sector contracted for the tenth time in the past 11 months. Chris Williamson, Chief Economist at Markit, commented,
The flash PMI for July suggests the euro area downturn showed no signs of letting up at the start of the third quarter and is consistent with GDP falling at a quarterly rate of around 0.6%, which is similar to the rate of decline we expect to see for the second quarter.
“The downturn is being led by an increasingly severe slump in manufacturing, where output is falling at a quarterly rate of around 1%. “Germany is now contracting at the steepest rate for three years, while the rate of decline in the periphery is also among the highest seen since mid-2009. The only sign of improvement was limited to the French services sector, which is likely to be due to domestic business settling down again after the general elections and could therefore prove temporary.
“Companies across the region are cutting staff numbers at the fastest rate for two-and-a-half years as the outlook darkens. Service providers are now the gloomiest since March 2009, while manufacturers are slashing their inventories of raw materials in the expectation of ongoing weak sales in coming months.
“Companies also cut prices to the greatest extent since early-2010 to help boost ailing sales, which should help alleviate inflationary pressures but may hit profits. Falling input costs should help protect profit margins in manufacturing, but costs continue to rise in services.
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