Second Month of Slowing Growth Despite Strengthening Periphery
Econintersect: The Markit Flash (preliminary) Composite PMI for the Eurozone is still well above the 50 mark between expansion and contraction with a reading of 52.8 for June. This is down from 53.5 in May and the lowest reading in six months. Manufacturing numbers show the largest declines from May while the services PMI reading dropped only 0.4, from 53.2 to 52.8. The June numbers resulted in the second consecutive month of decline in growth.
Click on graph for larger image.
The summary of highlights from Markit:
France is dragging down the rest of the EU-18 in many areas. Below are the charts for output and employment. It is noteworth that the 16 “other” countries as a group now have a higher output number than does Germany. What a blow to those who have suggested that Germany is the saint (producers) and the periphery is composed of sinners (slackers).
Chris Williamson, Chief Economist at Markit, made a generally opomistic statement about the report but expressed some concern about the lack of consistency across the Eurozone:
“The June PMI rounded off the strongest quarter for three years, but a concern is that a second consecutive monthly fall in the index signals that the eurozone recovery is losing momentum.
“Hopefully the recent stimulus measures from the ECB will help revive growth again, something which may already be evident as the survey saw the largest increase in inflows of new business for three years in June.
“Concerns about deflation will also be soothed to some extent by prices charged falling only very modestly, dropping to the smallest extent for over two years. However, this is in part due to rising costs, notably higher oil prices.
“The big concern is once again the divergent trends within the eurozone. Although the survey suggests the eurozone as a whole should grow by at least 0.4% in the second quarter, France appears to be entering a renewed downturn after GDP stagnated in the first quarter. Germany meanwhile looks set to grow by 0.7% or more in the second quarter, albeit with signs that the upturn is starting to lose momentum again.
“It is the rest of the region, outside of France and Germany, which – as a whole – is seeing the strongest growth momentum at the moment, highlighting how the ‟periphery‟ is recovering. Growth outside of France and Germany accelerated in June to round off the best quarter since the third quarter of 2007.”
