Euro Area: July PMIs at 11-month high

Euro Area flash Composite PMI has continued to recover in July to 51 (11-month high) from 50.6 in June , slightly above consensus expectations ( 49.8 ) . Both services (+0.7 points to 51.2, 6-month high) and manufacturing ind ices (+0.3 points to 49.8, 36-month high) improved. Subcomponents paused from previous months' improvements The breakdown of the index remained robust in July. Thus, composite new orders and future output components have improved again , but at a slower pace than in May and June. However, they stabilized at a level consistent with positive activity. This suggests that the frontloading behavior by US importers to anticipate the higher tariffs observed in previous months may gradually dissipate from now on. Germany still shows positive indicators, while France remains fragile The German manufacturing PMI increased for the eighth consecutive month, its highest level since July 2022, but below the 50 - threshold . The services sector index reached 50.1 for the first time since March 2025, prolonging the recovery observed since May. Finally, the Composite PMI remained broadly stable at 50.3, compared to 50.4 in June. All figures were below expectations. The French composite PMI improved to 49.6 (an 11-month high) from 49.2. However, both the services and manufacturing indices remained below 50, and the overall composition was very weak. Demand for French goods and services declined at the sharpest pace in three months, while sales weakness intensified particularly in the manufacturing sector, where new orders fell to their greatest degree since February. The rest of the Eurozone registered a solid expansion in output, which was the most marked since February . GDP growth would remain subdued in the coming quarter s July’s figures confirmed a slight improvement in the Euro Area activity , despite the uncertainties surrounding US tariffs . On the one hand, investors might have been waiting for a trade deal before making new investment decisions. On the other hand, EU exports might have benefited from the frontloading by US businesses before new tariffs are applied. Therefore, we forecast a slight decrease in activity, with GDP declining by around -0.2% QoQ in Q2 after the surprisingly robust rebound in Q1 (+0.6%) . Our official forecast is more pessimistic than our PMI based model that expects GDP growth around +0.1% in Q2 and +0.2% in Q3. Today’s print cements our view that the ECB is 'well positioned' to assess shocks and n eeds more information before acting.