Eurozone services growth moderates to 3-m low

The HCOB Eurozone Services PMI Business Activity Index indicated continued growth in business activity among service providers within the euro currency union in June, marking the fifth consecutive month above the neutral 50.0 threshold.

However, the index slipped to a three-month low of 52.8, down from 53.2 in May, suggesting a slightly slower expansion rate compared to the previous month.

Demand for eurozone services improved, albeit at a decelerated pace, at the end of the second quarter.

Notably, export orders contributed negatively to total sales growth for the month, highlighting that new business expansion was driven solely by domestic customers in June. Nevertheless, the decline in new work from international markets was marginal, marking the smallest decrease in a year.

Despite these trends, employment in the service sector continued to grow in June, maintaining a consistent upward trajectory observed over almost three and a half years. The pace of job creation moderated to its slowest in five months but remained robust relative to historical averages spanning 26 years of data collection.

The growth in activity was partly attributed to efforts by firms to reduce their backlogs of work, with outstanding business decreasing for the eleventh time in the past 12 months. The rate of depletion in work-in-hand was notably the sharpest since February.

Regarding prices, input cost inflation eased to a 38-month low by the end of the second quarter, though it remained elevated overall. Output charges also rose at the slowest pace in over three years.

Looking ahead, optimism persisted among service providers for future output in June, despite overall sentiment towards the outlook dipping to its lowest level since the beginning of 2024.