According to the report from IHS Markit, the Eurozone PMI Composite Output Index maintained its recent upward trend during July, rising by over six points on the month to a reach a level of 54.9. That compared to June’s 48.5 and slightly higher than the earlier flash reading (54.8). Moreover, it was the first time that the index has posted above the 50.0 no-change mark since February and represented the fastest rate of growth since June 2018. Both the goods-producing and service sectors recorded marked rates of growth during July, with manufacturing registering the slightly stronger pace of expansion. Whilst the increase in service sector activity was the first in five months, July data represented the first increase in manufacturing production since the start of 2019.

Overall activity rose at a considerably quicker rate than volumes of incoming new business during July. Whilst the continued easing of lockdown restrictions helped to support a first increase in new business for five months, demand was undermined by continued weakness in international trade.  Latest data showed that new export business declined for a twenty-second successive month in July, although the rate of contraction was only marginal.

Despite the upturns in activity and new business, companies continue to operate with a considerable degree of spare capacity. Backlogs of work were again reduced during July, falling for a seventeenth successive month (albeit relatively modestly). Subsequently, firms made further cuts to their workforce numbers, with staffing levels reduced for a fifth month in succession. 

Looking ahead to the coming 12 months, private sector companies on average expect activity to rise from present levels. Sentiment was also the highest recorded since February.