Eurozone Private Sector Growth Moderates In June

Eurozone private sector growth moderated in June from a six-year high due to a slowdown in services activity, yet the economy enjoyed the best quarter for six years, the flash data from the Purchasing Managers' survey by IHS Markit showed Friday.

The composite output index fell to 55.7 in June from a joint six-year high of 56.8 in May. The score was forecast to drop moderately to 56.6. A reading above 50 suggests growth in the sector.

However, at 56.4, the average Purchasing Managers' Index reading for the second quarter was above the reading of 55.6 seen in the first three months of the year. The score was also the highest since the first quarter of 2011.

Despite the June dip, the average expansion in the second quarter has been the strongest for over six years and is historically consistent with GDP growth accelerating from 0.6 percent in the first quarter to 0.7 percent, Chris Williamson, the chief business economist at IHS Markit, said.

The small falls in the survey's forward-looking components suggest that growth might slow slightly in the second half of the year, Capital Economics economist Jessica Hinds said.

The euro area flash services PMI declined more-than-expected to 54.7 from 56.3 a month ago. The expected reading was 56.1.

By contrast, the manufacturing PMI rose unexpectedly to 57.3 from 57.0 a month ago. The reading was forecast to fall to 56.8.

Slower growth was recorded in both France and Germany, down to five- and four-month lows, respectively, largely reflecting weaker rates of service sector expansion, data showed.

Germany's composite output index fell to 56.1 in June from 57.4 in May. Nonetheless, growth remained strong overall and was among the fastest registered over the past six years.

Manufacturing output and services business activity increased at slightly softer rates than in May.

The flash factory PMI fell less-than-expected to 59.3 in June from 59.5 in May. The score was forecast to fall markedly to 59.0. This was the second-strongest performance since April 2011.

At the same time, the services PMI declined to a five-month low of 53.7 from 55.4 in May. The expected reading was 55.4.

In Germany, the private sector employment growth eased to a six-month low. The survey data also signaled the weakest price pressures since November 2016.

Although France's composite PMI dropped to 55.3 in June from May's six-year peak of 56.9, the rate of increase remained marked overall. The latest expansion extended the period of private sector growth to one year.

The survey highlighted that job creation was the most marked in just under ten years.

The service sector activity rose for the twelfth time in as many months in June. The services PMI slid to 55.3 from 57.2 in May.

On the other hand, the factory PMI climbed to 55 from 53.8 in the previous month. Manufacturing output also continued to increase markedly, but at a fractionally softer pace than in the previous month.

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