Eurozone Private Sector Growth Fastest Since 2006

The euro area private sector grew the most in more than 15 years in July, underpinned by steep manufacturing output growth and an accelerated expansion of services activity, final data from IHS Markit showed on Wednesday.

The composite output index rose to 60.2 in July from 59.5 in the previous month. But the reading was below the flash score of 60.6.

A score above the neutral 50.0 indicates expansion in the sector. This was the longest uninterrupted sequence of expansion since the pandemic began early last year.

Services activity grew at its fastest pace since mid-2006. Although manufacturing production rose at its softest rate in five months, the expansion outstripped that seen in the services sector.

Easing virus restrictions and further vaccination progress are boosting demand for a wide variety of activities in the service sector.

The final services Purchasing Managers’ Index advanced to 59.8 from 58.3 in June. However, this was below the flash 60.4.

“Alongside the sustained elevated growth recorded in the manufacturing sector, the impressive strength of the service sector’s expansion in July means the eurozone should see GDP growth accelerate in the third quarter,” Chris Williamson, chief business economist at IHS Markit said.

Among the four largest Eurozone economies, the fastest growth was seen in Germany, where again the rate of expansion accelerated to a record high. In Italy, private sector activity growth jumped to a three-and-a-half year high, while Spain and France registered softer increases in output.

Germany’s private sector growth surpassed the previous record set in June 2006. The composite output index advanced to 62.4 in July from 60.1 in June. The flash score was 62.5.

Strong increases in activity were seen across both the manufacturing and service sectors. The services PMI came in at 61.8 compared to 57.5 in June and the flash 62.2.

France’s private sector growth slowed from June’s 41-month high in July. The composite PMI slid to 56.6 from 57.4. The flash reading was 56.8. But the score was consistent with sharp expansion when compared with those seen over the past three-and-a-half years.

At 56.8, the services PMI was down from 57.8 in June and the flash 57.0. Nonetheless, the sector expanded for the fourth straight month.

Italy’s private sector expanded at the fastest pace since January 2018. The composite output index posted 58.6 in July compared to 58.3 a month ago.

At the sector level, the upturn was broad-based, with manufacturing growth again outpacing that for services, despite the latter seeing the quickest rate of expansion for 14 years. The services PMI rose to 58.0 in July from 56.7 in the previous month.

Spain’s private sector activity growth remained strong in July, though slightly down from June. The composite output index recorded 61.2, down from 62.4 in June, but above the crucial 50.0 no-change mark for the fifth successive month. The services PMI dropped to 61.9 in July from 62.5 in the previous month.

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