Eurozone economic growth slowed for a second month running in June, easing to the weakest since December, according to the flash reading of the Markit Eurozone PMI. Growth remained robust in Germany despite weakening slightly, and France‟s downturn deepened. Elsewhere across the region, however, growth was the strongest since August 2007.
The headline index covering output of both manufacturing and services fell from 53.5 in May to 52.8, dropping further from April‟s 35-month high. Despite the slowdown, the average PMI reading for the second quarter as a whole was the highest since the second quarter of 2011. Output has also now risen for 12 consecutive months. Output rose at identical rates in manufacturing and services, but the rates of growth slowed in both cases to nine- and three-month lows respectively.
In a sign that activity may reaccelerate, the survey‟s measure of new orders rose to its highest since May 2011, driven by the service sector. A slowing in growth of manufacturing new orders to the weakest since October pointed to ongoing sluggish production growth in coming months, while service sector companies reported the largest inflow of new business for three years. The service sector also saw business expectations about the year ahead improve to the second-highest seen over the past three years.
Firms took on more staff in order to boost capacity in line with the ongoing growth in activity. That said, rates of job creation in both manufacturing and services remained similar to the very modest rates seen in April and May.
Price pressures meanwhile picked up, with average input costs showing the largest monthly increase since November. Average costs in the service sector grew at the fastest rate since December 2012 and manufacturers‟ input costs rose for the first time since January. Both sectors reported higher oil prices as a key cause of rising costs.
Prices charged meanwhile continued to fall, but the decline was the smallest in the current 27-month sequence of reductions. Although charges for services continued to fall slightly, manufacturers raised their prices for the second month running.
By country, German companies continued to report robust output growth, but the pace of expansion was the weakest for eight months as growth slowed in both manufacturing and services. New order growth was more resilient and broadly unchanged since May, while headcounts continued to rise. France meanwhile saw business activity contract for the second month running, suffering the steepest downturn since February as output fell in both manufacturing and services. Although only a marginal decline in new orders was reported, headcounts were cut at the fastest rate since February.
Elsewhere across the single currency area, output growth accelerated again to reach the highest since August 2007. New orders showed the largest increase since July 2007. Although job creation remained only modest, recent months have seen the best spell of job creation in the „periphery‟ since early-2008.
