S&P Global

Business growth in the Euro zone has slowed much more than expected this month, as rising living costs saw consumers defer purchases to save money, a survey has showed.

S&P Global’s flash Composite Purchasing Managers’ Index (PMI), recognized as a reliable indicator of overall economic health, fell to 51.9 in June from 54.8 in May, its lowest level since February 2021.

The composite new business index slumped to 50.0 from 53.3 the previous month, a 16-month low, whilst a PMI covering the bloc’s dominant services industry sank to 52.8 from 56.1.

“Euro zone economic growth is showing signs of faltering as the tailwind of pent-up demand from the pandemic is already fading, having been offset by the cost of living shock and slumping business and consumer confidence,” said S&P Global’s Chris Williamson.

Growth in demand for services all but vanished and firms faced close to record levels of increases in input costs, resulting in retail price rises. The input prices index rose to 78.3 from 77.4, a level only between twice in the survey’s 24-year history – by the two preceding months.

Inflation in the bloc hit a record high of 8.1% last month with further increases expected over the coming months coming months, meaning the European Central Bank is expected to raise its deposit rate above zero for the first time in a decade.

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