Economic activity in the eurozone plummeted in July, a key survey showed on Friday, with a big drop in manufacturing and consumers' post-lockdown spending sprees braked by high prices. 

The closely watched monthly purchasing managers' index, or PMI, by S&P Global fell from 52.0 in June to 49.4, below the 50-point level that indicates growth.

"Excluding pandemic lockdown months, July's contraction is the first signalled by the PMI since June 2013", and pointed to negative growth in GDP, said Chris Williamson, chief business economist at S&P Global. "Although only modest at present, a steep loss of new orders, falling backlogs of work and gloomier business expectations all point to the rate of decline gathering further momentum as the summer progresses," he said.

"July's contraction is the first signalled by the PMI since June 2013", and pointed to negative growth in GDP- Chris Williamson, chief business economist at S&P Global

The survey showed that the steepest decline in activity was felt in Germany, as the exporting powerhouse suffered the effects of high prices and anaemic demand for its high-quality products. The economy in France, where activity is driven by domestic consumers and services, neared stagnation.

Across Europe, the survey showed that consumer-orientated services such as tourism and recreation, media and transportation saw either no growth or outright declines in sharp contrast to when COVID restrictions were first lifted. This added to the manufacturing woes, with activity at factories declining sharply for the second month in a row. 

"Barring COVID-19 lockdown periods, the July drop in factory output has not been exceeded since December 2012", the survey said, when the continent was in the throes of the eurozone debt crisis.

S&P also pointed to the negative effects of tighter monetary conditions, with the European Central Bank embarking on a path of increased borrowing costs, which could also slow activity.