Activity in euro area services and at factories slows further in July

Activity levels in the single currency bloc's factory and services sectors slowed further in July, closely followed survey results showed.

The HCOB 'flash' Eurozone composite Purchasing Managers' Output Index, which tracks production from both sectors, dipped from a reading of 49.9 for June to 48.9 last month.

It marked the second consecutive fall in output volumes following five months of growth with the contraction having accelerated from the marginal drop seen at the end of the second quarter.

The survey compiler noted how new business inflows dropped at an "increasingly severe" rate in July.

"A steepening loss of new orders in the goods-producing sector, which saw one of the steepest declines since 2009, was accompanied by the first downturn in new orders for services for seven months," HCOB said.

A separate PMI just for services activity accounted for the bulk of the decline, retreating from 52.0 to 51.1.

That was worse than economists' forecasts for a slowdown to 51.7.

For all the PMI's the 50 point level marks the threshold between expansion and contraction.

Readings above and below 50 poinst denote successively faster rates of growth or decline the further obe moves past the threshold.

The manufacturing PMI meanwhile slipped from 43.4 to 42.7 (consensus: 43.6).

Excluding the pandemic, the decline in French output was the steepest since May 2013 while German, factory output recorded the most rapid drop since 2009 HBOC said.

Service sector input costs meanwhile continued to increase at a pace above their long-run average, in particular due to wage pressures, although the pace of increase did slow for a fifth month running.

"The eurozone economy will likely move further into contraction territory in the months ahead, as the services sector keeps losing steam," said Hamburg Commercial Bank chief economist Cyrus de la Rubia.

"The latest PMI reading is not going to please ECB officials as prices in the private sector are still creeping up, led solely by the substantial services sector. Thus, ECB president Christine Lagarde will certainly stick to her guns and hike interest rates by 25 bp at the next monetary meeting at the end of July."