Eurozone manufacturing growth eases in July

The eurozone manufacturing sector saw its steepest drop in production in July since April 2013, according to data released on Wednesday.

IHS Markit's flash eurozone manufacturing purchasing managers' index fell to 46.4 from 47.6 in June, missing expectations for an unchanged reading.

Meanwhile, the PMI for the services sector slipped to 53.3 this month from 53.6 in June, in line with expectations.

The composite PMI - which gauges the performance of the services and manufacturing sectors - declined to 51.5 from 52.2, undershooting expectations of 52.1 and marking the weakest monthly expansion of output for three months.

Chris Williamson, chief business economist at IHS Markit, said: "The eurozone economy relapsed in July, with the PMI giving up the gains seen in May and June to signal one of the weakest expansions seen over the past six years. The pace of GDP growth looks set to weaken from the 0.2% rate indicated for the second quarter closer to 0.1% in the third quarter.

"The manufacturing sector has become an increasing cause for concern. Geopolitical worries, Brexit, growing trade frictions and the deteriorating performance of the autos sector in particular has pushed manufacturing into a deeper downturn with the survey indicative of the goods-producing sector contracting at a quarterly rate of approximately 1%."

Jack Allen-Reynolds, senior economist at Capital Economic, said the PMI survey points to continued weak GDP growth and declining price pressures, boosting the case for the European Central to loosen policy at Thursday's meeting.

"Overall, the PMI surveys support the conclusion that ECB policymakers already seem to have reached - that further loosening is needed," he said. "We think they will start by changing their forward guidance on interest rates and QE tomorrow, before cutting the deposit rate in September and re-launching QE in November."