Euro: PMI resilience tempers stagflation fears – BNY

BNY’s Geoff Yu notes Eurozone PMIs have surprised to the upside, with the composite at an eight‑month high and services back in expansion, easing immediate stagflation worries. He stresses this is not a clear signal for further ECB tightening, as another rate hike could risk turning a tentative recovery into a policy-driven slowdown for the Euro and regional assets.

Stronger PMIs but ECB caution

"Growth defies gloom: Europe’s latest PMIs have generally surprised to the upside, pushing back against immediate stagflation fears. That resilience is welcome, but it is not a clean invitation for the ECB to tighten again. Another hike risks turning a nascent recovery into a policy-induced slowdown."

"Eurozone composite PMI came in at 52.0 points in July, up from 50.0 in June, marking an eight-month high and a return to modest private sector growth at the start of Q3. The services PMI also rose into expansion territory at 51.7 from 49.4, ending a three-month downtrend."

"Output and new orders increased at the fastest pace since last November, with Germany, Italy and Spain all improving, while France remained in contraction. The survey pointed to softer inflationary pressures, as both input costs and output charges eased further."

"Germany’s services PMI reading for July was 49.8 points, up from 48.6 in June, indicating that activity fell only fractionally and moved closer to stabilization. The survey showed the first marginal rise in new business in five months, while export demand continued to decline, though at a slower pace."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)