Eurozone economic growth rose to a four-year high in June, as levels of new business and employment continued to expand at solid rates. The final Markit Eurozone PMI® Composite Output Index posted 54.2 in June, up from 53.6 in May and fractionally above the earlier flash estimate. The upturn in June also took the average index reading
for the second quarter as a whole to a four-year high.
Rates of growth improved in both the manufacturing and service sectors during June. Manufacturing production rose at the joint-quickest pace in a year, while the expansion in service sector business activity was the fastest since May 2011. National PMI data signalled that Ireland remained at the top of the PMI growth league table in June, seeing its rate of output expansion accelerate to a six-month high. Spain stayed in second position, despite its pace of growth slowing sharply to the
weakest in the year so far.
Economic growth accelerated in Germany, Italy and France during June, hitting a two-month high in Germany, 12-month peak in Italy and 46-month record in France.
Furthermore, the French manufacturing sector signalled an expansion of output for the first time since May 2014, meaning that all of the ‘big-four’ manufacturing and service sectors recorded concurrent growth. The last time this was achieved was during April 2014.
The survey also indicated that both employment and new business had risen at the strongest rates (on average) for four years over the second quarter as a whole, despite growth easing slightly in June in both cases. Rates of job creation in Germany, France and Spain all remained broadly steady in June, but eased to a four-month low in Italy and two-month low in Ireland.
Although input price inflation slowed from May’s three year high, costs nonetheless continued to rise on the back of higher oil prices, wages bills and import costs (the latter reflecting the euro’s recent depreciation). June saw a further marginal decrease in average output charges. Germany, Spain and Ireland reported increases, whereas further price discounts were offered in France and Italy.
Services:
Service sector business activity growth accelerated to a four-year high in June, as output expanded in each of the ‘big-four’ eurozone economies. At 54.4 in June, up from 53.8 in May, the Eurozone Services Business Activity Index posted an identical reading to its earlier flash estimate. Output has now risen in each of the past 23 months.
By nation, the strongest performance was registered by Ireland, where output rose at the sharpest pace since September 2006. Spain was some way back in second position, as its rate of service sector growth eased to a six-month low.
Rates of output expansion quickened in Germany (two-month high), France (46-month high) and Italy (12-month high). In the case of Germany and Italy, this was despite a slight moderation in the pace of expansion in new orders. France saw new business rise to the greatest extent since August 2011. Job creation was registered for the eighth month running, with the pace of increase just shy of May’s four-and-a-half year peak. Employment increased across the ‘big-four’ nations and Ireland.
Growth rates in staffing levels slowed slightly in Germany, Italy and Ireland. Meanwhile, France and Spain saw the strongest job creation since December 2011 and September 2007 respectively.
The outlook† for the sector also remained positive in June, with eurozone service providers reporting they expect business activity to be higher in one year’s time. Optimism ticked higher in Germany and France, but edged lower in Italy, Spain and Ireland. June data showed a further divergence in firms’ input prices and output charges. Cost burdens increased during the month, although the pace of inflation eased from May’s 29-month record. In contrast, selling prices were discounted for the
forty-third month running amid reports of efforts to satisfy client demands.
Germany and Ireland reported output charge increases, while selling prices were broadly unchanged in Spain. France and Italy both reported accelerated rates of decline in output charges. †for business optimism, companies are asked whether they expect levels of business activity in one year’s time to be higher, the same or lower than the current month.
Comment:
Chris Williamson, Chief Economist at Markit said: “Despite the escalation of the Greek crisis in the second half of the month, the final PMI for June came in slightly above the ‘flash’ estimate, suggesting the turmoil has so far had little discernible impact on the real economy.
“Business activity expanded at the strongest rate for just over four years in June and hiring remained reassuringly resilient, with job creation also running at its highest for four years in the past two months. “The survey data point to GDP rising 0.4% in the second quarter, with the upturn led by Spain and Ireland alongside ongoing robust growth in Germany, but with recoveries also now building momentum nicely in Italy and France.
“The combination of ECB stimulus and low inflation appears to be boosting spending among consumers and businesses, offsetting ‘Grexit’ anxiety. However, with growth of new business slowing for a third month running, the survey is hinting that some risk aversion is creeping in which could hit growth in coming months if the Greek crisis is not resolved soon.”
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