24 July 2023
Euro zone business activity contracted sharply in July, driven by falling demand in the service sector and rapid decline in factory output, according to a survey. The downturn was broad in scope, affecting Germany and France, and increased concerns of a recession in the region. This downturn is seen as a result of the European Central Bank’s continued interest rate increases, which appear to be hurting consumers and the service sector. The Composite PMI for the euro zone fell to an eight-month low of 48.9, indicating contraction. The manufacturing sector was particularly weak. Consequently, the euro slipped, and the bloc’s government bond yields fell. The downturn is causing significant concerns for the future of the euro zone economy.