Euro: PMI resilience tempers stagflation fears – BNY

BNY’s Geoff Yu highlights Eurozone Purchasing Managers' Indexes (PMIs) have exceeded expectations, with the composite reading at an eight-month high of 52.0 in July, up from 50.0 in June. The services sector also returned to expansion, marking a 51.7 in July, following a three-month decline. This resilience in growth has eased immediate stagflation concerns, but Yu cautions it doesn't signal immediate further tightening by the European Central Bank (ECB).

An additional rate hike could potentially hinder a nascent recovery, turning it into a slowdown driven by policy decisions. July's Eurozone composite PMI reached 52.0, surpassing the 50.0 in June to mark an eight-month high and the start of Q3 with modest private sector growth. Services PMI also climbed to 51.7 from 49.4, ending a downward trend.

Output and new orders surged at the fastest rate since November, with Germany, Italy, and Spain showing improvements, while France remained in contraction. Inflation pressures appeared softer, with both input costs and output charges easing. Germany's services PMI for July stood at 49.8, up from 48.6 in June, signaling only a slight dip and a closer approach to stabilization.

New business activity saw the first increase in five months, although export demand continued its decline, albeit at a slower pace.