At 46.4 in June, the Markit Eurozone PMI® Composite Output Index was higher than both May’s reading of 46.0 and the earlier flash estimate of 46.0, but still remained deep in contraction territory. The average reading for Q2 2012 was the lowest for three years as a result.
Rates of decline eased marginally in both services and manufacturing, but both sectors have seen the strongest quarterly contractions for three years in the second quarter.
The spreading of the economic malaise from the periphery of the currency union to its core continued in June. German output contracted at the fastest rate in three years, and France also saw a further decline (albeit slower than in May). Italy and Spain, meanwhile, remained in deep recessions.
A further contraction of business activity is likely in the coming months as intakes of new work continued to decline sharply, albeit at the slowest rate for three months. The sharpest depletion of backlogs of work since July 2009 also suggests that spare capacity remains available, with backlogs falling across all of the nations covered by the survey.
The ongoing steep downturn in order books led to a fall in employment for the sixth straight month, with the rate of job losses running at the second-highest in over two years. Employment fell in France, Italy and Spain, with the steepest cuts again seen in Spain. German payroll numbers continued to buck this trend, as job creation in services offset losses at manufacturers.
Weak demand and slower global economic growth reduced the pricing power of both Eurozone manufacturers and service providers in June. Average factory gate prices fell for the first time since March 2010, while service sector charges decreased at the fastest pace for 28 months. Average prices charged for all goods and services fell at the fastest rate since February 2010.
At 47.1 in June, up from 46.7 in May, the Markit Eurozone Services Business Activity Index rose to a three-month high. The index was above the earlier flash estimate of 46.8, but remained at a level consistent with an ongoing solid rate of contraction.
Service providers were hit by a further sharp fall in new business, with firms reporting that market conditions remained weak due to ongoing consumer and business uncertainty. However, the rate of decline in new orders eased to a three-month low and was also less steep than signalled by the earlier flash estimate.
Business activity at German service providers stagnated in June, ending an eight-month period of growth. Rates of contraction meanwhile eased in France, Italy, Spain and Ireland. The steepest downturns were again seen in Italy and Spain.