Business activity in the eurozone is beginning to rebound on a more convincing level, with the last month’s data showing this moderate turn. The July composite final Purchasing Managers’ Index (PMI), a key indicator of economic activity, increased to 50.9, indicating expansion for the third straight month. This figure only represents what we were able to track in March. It’s an encouraging sign that the eurozone economy is recovering and returning to growth after a double-dip recession.
The services sector, especially professional and business services has been a key driver of this growth. It’s been in positive territory for the last eight months. While growth rates are modest by historical standards, the sector’s consistent performance has provided a significant counterbalance to recent weakness in other industries. In July, the rate of expansion in the service sector accelerated a bit. This acceleration indicates that the sector is quickly recovering from past recessions.
The manufacturing sector still has not recovered, coming in with a PMI under 50—meaning contraction. Today that is a very different story. This is expected to be the floor, as in November and December last year, the numbers fell to 45.2. Since late 2022, manufacturing has experienced a significant reversal. This change has been critical in creating strong overall business expansion throughout the eurozone.
The guidance from the European Central Bank (ECB) indicates that it will hold its key interest rate at 2.15% into 2025. This is a historic increase from the 0% rate in 2019. Interest rates are going up once more. The composite PMI indicator is trending back toward pre-pandemic norms, which suggest that economic conditions are overall stabilizing despite a still-weak pace of growth.
On balance, business activity is on the rise, infusing new hope. It’s important to note that a majority—an overwhelming 77.37% of retail investor accounts—lose money trading contracts for differences (CFDs) and spread betting with these high risk derivatives with providers. This figure serves as a reminder of the risks of overly aggressive investment strategies in times of moderate economic expansion.