Flat PMI signals stagnant outlook despite German rebound
The euro zone economy remained stagnant for a second consecutive month in June, according to HCOB’s flash composite Purchasing Managers’ Index (PMI) released Monday. The index, compiled by S&P Global, came in at 50.2, the same as May’s reading and just above the 50 threshold that separates growth from contraction.
Economists polled by Reuters had expected a slightly stronger reading of 50.5. The data suggest the bloc’s recovery is faltering, weighed down by persistent weakness in both manufacturing and services across several major economies.
Germany up, France down
Germany, the euro zone’s largest economy, was a rare bright spot as its manufacturing sector recorded the biggest increase in new orders in over three years. However, France’s economy contracted further, with both manufacturing and services sectors continuing to decline, dragging on the overall euro zone performance.
“June’s flash PMI survey for the euro zone was consistent with the economy flat-lining,” said Jack Allen-Reynolds of Capital Economics. “The weakness in activity was broad-based.”
Services and manufacturing remain weak
The services PMI rose slightly to 50.0 from 49.7, but still shows no growth. Meanwhile, manufacturing remained in contraction, with the index stuck at 49.4. The measure of manufacturing output feeding into the composite PMI fell to 51.0 from 51.5.
Demand across the bloc dropped for the 13th straight month, though more mildly than in May. The new business index climbed to 49.7 from 49.0. Services firms showed greater optimism, with the business expectations index jumping to a four-month high of 57.9.
Price pressures ease, ECB cautious
Euro zone factories continued to cut selling prices in June, with the output prices index steady at 49.2. With inflation falling below the European Central Bank’s 2% target in May, the ECB recently paused its policy easing cycle after eight consecutive rate cuts.
Bundesbank President Joachim Nagel reiterated that the ECB will remain vigilant, saying, “We will keep doing all that is necessary to complete our mission on inflation.”
