Manufacturing hampers Eurozone growth in June

London — The Eurozone economy flatlined for a second month in June, barely expanding as the bloc’s dominant services industry showed only a small sign of improvement and manufacturing displayed none at all, a survey showed on Monday.

HCOB’s preliminary composite eurozone purchasing managers’ index (PMI), compiled by S&P Global and seen as a good guide to growth, held steady this month at May's 50.2.

That was barely above the 50 mark separating growth from contraction and below expectations in a Reuters poll for 50.5.

“June’s flash PMI survey for the Eurozone was consistent with the economy flatlining,” said Jack Allen-Reynolds at Capital Economics.

“The weakness in activity was broad-based, with the services index edging up to just 50.0 while the manufacturing index edged down.”

Business activity in Germany, Europe’s largest economy, returned to growth as its recovering manufacturing sector saw its strongest increase in new orders in more than three years. But in France activity contracted further as weakness in both manufacturing and services hit the Eurozone’s second-biggest economy, S&P Global said.

In Britain, outside the currency union, business activity expanded modestly as new orders grew for the first time this year but employers cut jobs more quickly and worried about the conflict in the Middle East.

Overall demand in the bloc fell for a 13th month, albeit only mildly, with the new business index rising to 49.7 from 49.0.

The services PMI nudged up to sit right on the break-even mark, up from May’s final reading of 49.7, as the Reuters poll had predicted.

But optimism among services firms increased and the business expectations index bounced to a four-month high of 57.9 from 56.2.

The headline manufacturing index, which has been sub-50 since mid-2022, held steady at May’s 49.4, defying expectations for a lift to 49.8. An index measuring output that feeds into the composite PMI fell to 51.0 from 51.5.

Factories reduced their selling prices for a second month. The output prices index remained at 49.2. Eurozone inflation fell below the European Central Bank’s (ECB’s) 2% target in May and the central bank signalled a pause in policy easing after cutting its deposit rate for an eighth time this month. One of the ECB’s top policymakers, Bundesbank president Joachim Nagel, said last week that the bank will keep doing all that is necessary to complete its nearly accomplished mission on inflation.

Reuters