June sees further fall in Eurozone private sector output. Input prices drop for first time since December 2001.

The Eurozone private sector economy contracted for the fourth successive month in June and at the sharpest rate in eighteen months according to the latest Reuters Eurozone Purchasing Managers Index survey of the region.

Although activity levels fell at broadly similar rates across the manufacturing and service sectors, the trends in the two sectoral series have diverged in recent months.

While the overall rate of manufacturing contraction has accelerated in the past two months, the pace of service sector contraction has eased over the same period.

This divergence partly reflects the recent appreciation of the euro which, with exports forming a greater proportion of total sales in the manufacturing than the services sector, has affected manufacturers' new business to a greater extent than their service sector counterparts.

Key data from the indices (50 = no change on previous month) …

The headline Composite Output Index, which is an accurate indicator of economic growth across the euro area, fell for the fifth month running to record 48.1, its lowest reading since December 2001.

The Composite Input Prices Index signalled a decline in average input prices for the first time since December 2001. The Index has fallen sharply since March's oil-price related peak, and dropped to 47.9 in June, as the strength of the euro also exerted a significant deflationary influence on overall costs Average input prices fell for the second month running in the manufacturing sector while remaining broadly unchanged in the services sector

In line with falling workloads across the Eurozone private sector, employment levels continued to be cut as companies sought to trim capacity and reduce their costs. At 45.8 in June, up only marginally from May's survey low of 45.5, the Composite Employment Index indicated that staffing levels continued to fall at a historically sharp rate. The pace of decline of employment was slightly sharper in the manufacturing sector than in the service sector. Manufacturing employment has now fallen for twenty-five consecutive months, compared to eleven successive months in services

New Orders Measured overall, levels of private sector new business in the Eurozone fell for the fourth successive month in June, with the rate of contraction easing only slightly from May's recent high. The Composite New Orders Index registered 46.0, up from 45.6 in May, with the rise reflecting an easing in the pace of decline of service sector new business. Manufacturing new orders, in contrast, fell at an accelerating rate, with the decline in orders in June the sharpest since December 2001.

The Eurozone comprises the eight largest European economies (Austria, France, Germany, Greece, Ireland, Italy, The Netherlands and Spain) within the twelve-nation euro currency zone. Together they account for an estimated 74% of total Eurozone private sector economic activity.

Data sourced from: NTC Research; additional content by WARC staff