Europe’s economy saw renewed weakness and employment growth cooled, according to the Hamburg Commercial Bank Flash Eurozone Composite PMI Output Index released Friday by S&P Global. The index fell to a level of 50.3 in June — its lowest since January — from 52.8 in May. On a positive note, inflationary pressures eased.

Manufacturing remained the principal area of weakness with factory output falling for the third straight month, according to the index’s report. In addition, service sector growth output slowed sharply as a recent resurgence in spending on services lost momentum. Service-sector business activity grew at its slowest rate since January.

Also, work backlogs fell at their steepest rate in seven months. The falling backlogs can indicate excess capacity and are typically a precursor to downward pressure on jobs numbers, the report said. And employment growth slowed for a second consecutive month in June with the rate of job creation at its lowest level since February. Manufacturing headcounts were also cut for the first time since January 2021 and jobs growth in the service sector waned, though it remained strong by historical standards.

In the euro area, weakness was led by France, where output fell for the first time since January amid strikes that may have added to the economy’s headwinds. Growth also came close to a standstill in Germany.

“After Eurozone GDP fell for the second time in a row in the first quarter, the probability has increased somewhat that the GDP change will again carry a negative sign in the current quarter, due in part to weak services activity in France,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. “Even if our baseline scenario of slightly positive Eurozone growth in the second quarter still becomes reality, the downward trend in the Composite PMI points to a difficult second half of the year as companies across all sectors face deteriorating order books.”

Data for the report was collected 12 June to 21 June.