(Alliance News) - Business activity in the eurozone economy reached a two-month high in June after declining in May, although the pace of growth remained slow, according to preliminary data released by S&P Global on Monday.

The Hamburg Commercial Bank eurozone services purchasing managers index increased to 50.0 points in June from 49.7 in May. This lifted the reading to the 50.0-point threshold separating growth from contraction.

The HCOB eurozone composite PMI edged remained at 50.2 points in June, unchanged from May, and just above the 50.0-point threshold.

Germany saw a marginal rise in output, after business activity fell slightly in May, and posted an increase in new export orders for the first time in just over three years. Meanwhile France's output continued to decline for the tenth consecutive month. The rest of the eurozone posted an increase in business activity, though it was the slowest pace of growth seen since last November.

New orders neared stabilisation in June, S&P Global said, as they continued to fall slightly, but at the slowest rate in 13 months. New export orders reflected a similar pattern, decreasing at their most modest pace since April 2022. Outstanding business reduced slightly, to the smallest extent in just over a year.

Manufacturing orders were unchanged from May, ending three years of sustained contraction. This sector led business activity in June, as production rose for the fourth month in a row, albeit at its slowest rate in three months. Manufacturers reduced purchasing activity, but the pace was among the weakest in the last three years. Supplier delivery times increased for the first time in four months.

In Services, new orders decreased slightly, but business activity was unchanged, after dropping for the first time in six months in May. Services also led a slight rise in employment, offset by cuts to manufacturing jobs, which decreased faster than the month prior.

France and Germany reduced employment, but hiring continued to increase across the rest of the eurozone, for modest overall growth, which matched the pace recorded in May.

Business confidence rose in June to its highest point since January, led by the service sector. However, manufacturing firms were more confident in their year-ahead outlook. Positive sentiment in France was much stronger than in May, and optimism was recorded across the rest of the eurozone.

Input cost inflation eased for the fourth month in a row, at its weakest pace since November. There was a contrast between manufacturing, which posted the third successive month of costs falling, and services, which continued to see strong inflation, particularly in selling prices.

"For the ECB, the price environment for services remains slightly tense," commented HCOB Chief Economist Cyrus de la Rubia.

"This higher inflation in the service sector is partly offset by a deflationary environment in the goods sector. However, energy prices play an important role here. Until recently, they were still falling, but have risen sharply since the conflict between Israel and Iran. This information has only been partially reflected in the surveys.

"Overall, however, the ECB can remain relatively calm, as the strong euro and the deflationary effect of US tariffs argue against a short-term rise in inflation."

Overall, selling prices increased more quickly than in May. France posted higher charges in June, "joining Germany and the rest of the euro area in inflation territory," S&P Global noted.

De la Rubia added: "The eurozone economy is struggling to gain momentum. For six months now, growth has been minimal, with activity in the service sector stagnating and manufacturing output rising only moderately. In Germany, there are signs of a cautious improvement in the situation, but France continues to drag its feet."

The PMI eurozone survey is based on responses from around 5,000 manufacturing and services firms across the euro area, collected between June 12 and June 19.

By Holly Munks, Alliance News reporter

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