• July final services PMI 51.7 vs 51.6 prelim
• Prior 49.4
• July final composite PMI 52.0 vs 51.9 prelim
• Prior 50.0

The final estimate here reaffirms a solid rebound in euro area business activity to start the third quarter. That as the services print is a 5-month high with the composite print being a 8-month high.

Of note, output and new orders rose at strongest rates since last November as inflation cools. The July expansion was broad-based amid further growth in the services sector as well as a more sustained uplift in the manufacturing side. Germany posted its first rise in private sector output since March, while both Italy and Spain saw stronger rates of growth.

Looking to price pressures, the rates of both input cost and output charge inflation dropped in July. And adding to that, prices set for euro area goods and services were lifted by the smallest margin since March. All that being said, the pace of both input and output price inflation were elevated relative to the survey average historically (chart below).

S&P Global notes that:

“July’s final PMI adds to a picture of encouraging resilience of the eurozone economy amid the ongoing conflict in the Middle East, but also underscores how the business climate is being steered by the changing geopolitical landscape.

“A rise in the headline output index means the survey is signalling quarterly GDP growth of 0.3%, importantly reflecting an increasingly broad-based upturn. July saw the first significant increase in service sector activity since the outbreak of the war, adding to the sunnier summer picture from manufacturing, which has reported the largest increase in production for over four years.

“Business optimism also brightened in July, lifting to the highest since January. Sentiment has been buoyed by a combination of improving demand conditions, with new orders rising in July at the fastest rate since November, alongside the slowest growth of firms’ costs since February.

“However, these improvements came on the tailwind of June’s lower oil prices and easing tensions in the Middle East. With the conflict having since flared up again, we are seeing renewed downside risks to growth and upside risks to already-elevated inflation. The latter puts policymakers in more hawkish decision-making stance, though the marked drop in the PMI price gauges potentially provides a window for further rate hikes to be delayed until the outlook for inflation becomes clearer.”

This article was written by Justin Low at investinglive.com.