Eurozone growth remains tepid in July, PMI shows

The eurozone economy extended its modest growth streak into a seventh month in July, as services activity picked up pace while manufacturing remained subdued, according to HCOB’s latest PMI survey released on Tuesday.

The HCOB Eurozone Composite PMI Output Index inched up to 50.9 from June’s 50.6, signalling only marginal growth and falling short of the historical average of 52.4. Both services and manufacturing saw expansion, but momentum remained fragile amid stagnant demand and weak export sales.

Spain led the bloc with the strongest increase in business activity, followed by Italy and Germany, which recorded its fastest growth in four months. France, however, continued to contract for the eleventh consecutive month, with concerns mounting over planned budget cuts and rising political instability.

Despite subdued demand, eurozone employment rose for the fifth month in a row, with July marking the sharpest pace of job creation in over a year. Yet, business sentiment dipped slightly, reflecting softer expectations across both major sectors.

Services activity climbed to a four-month high with the PMI hitting 51.0 in July, up from 50.5 in June. Still, incoming new work remained flat, and export orders declined for a 26th consecutive month.

Inflationary pressures eased, with input costs in the services sector rising at the slowest pace since October 2024. Output charges edged up slightly, suggesting limited pricing power.

With inflation moderating, analysts now expect a further interest rate cut by the European Central Bank in the second half of 2025.

“Inflation is easing in the eurozone’s services sector, increasing the likelihood of one further interest rate cut by the European Central Bank in the second half of the year. Costs are rising at a pace that is the slowest in nine months and below the long-term average. This dovetails with recent data from the ECB’s Wage Tracker, which shows a deceleration in wage growth—an essential cost component for service providers—over the past several months.” Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, said.

Attribution: Amwal Al Ghad English

Subediting: Y.Yasser