Eurozone business growth accelerates in June to 4-year high

BRUSSELS - Reuters

A protester holds an EU flag during a pro-European demonstration in front of the Greek parliament in Athens on June 18, 2015. AFP Photo

Eurozone private businesses expanded at their fastest pace in four years this month, a survey showed on June 23, providing the clearest signs yet of a solid recovery in the region.

The bright readings for the eurozone were complimented by surveys out of Germany and France, the bloc’s two largest economies, which showed both factories and services firms grew much more quickly than expected.

Coming at a time when global financial markets are transfixed by the stand-off between Greece and its creditors, the data are likely to cheer the European Central Bank which is printing 60 billion euros a month to boost growth and inflation.

Greece presented new proposals on June 22 that eurozone leaders welcomed as a basis for a possible agreement to unlock aid and avert default and a potential exit from the euro.

But some eurozone leaders cautioned that much work still needed to be done, and some Greek lawmakers reacted angrily to concessions offered by Athens. 

Markit’s Composite Flash Purchasing Managers’ Index, based on surveys of thousands of companies and seen as a good growth indicator, rose to 54.1 from 53.6, matching the most optimistic forecast in a Reuters poll. It was the highest reading since May 2011.

“This is a decent upturn in terms of business activity, demand and jobs growth and points to 0.4 percent economic growth in the second quarter,” said Chris Williamson, chief economist at survey compiler Markit.

The PMI has now been above the 50 level that separates growth from contraction for two years and that GDP prediction matches a Reuters poll taken last week.

To meet the demand firms took on more workers and an employment sub-index only dipped to 51.9 from May’s four-year high of 52.3.

The bloc’s dominant service industry contributed to most of the overall surge and a PMI covering those firms surged to a four year high of 54.4 from 53.8 in May, above all forecasts in a Reuters poll whose median forecast was 53.6.

Firms, however, cut prices deeper to drum up new business in June, the survey showed. The output price sub index was 49.0, down from 49.3 in May.

Consumer prices in the euro zone rose 0.3 percent year-on-year in May, driven by higher food and services costs and a weak euro. Williamson, however, added core inflation which strips out volatile components such as energy costs is “still very weak”.

A factory PMI rose to 52.5 from 52.2, its highest in over a year, while a sub-index covering output, which feeds into the composite PMI, nudged up to 53.5 from 53.3.