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Euro zone businesses end second quarter with slower growth: PMIs

By dailymail / Published on Friday, 23 Jun 2017 08:59 AM / No Comments


Roaring euro zone business growth tailed off unexpectedly toward the end of the first half of 2017 following a sudden slowing in the pace of expansion by services firms, a survey showed on Friday.

But with inflation relatively resilient and overall growth still quite strong, pressure will likely be maintained on policymakers at the European Central Bank to pare back soon on their ultra-loose monetary policy.

Earlier this month, the ECB gave up its bias for more rate cuts in a small step towards normalisation.

IHS Markit’s Flash Composite Purchasing Managers’ Index for June fell to 55.7 from the 56.8 it registered in April and May, which was its highest since April 2011. A reading above 50 indicates growth.

A Reuters poll had predicted no change to the index, seen as a good guide to growth, and none of the economists polled had predicted such a big fall.

“At the moment I’m not too worried about it,” said Chris Williamson, chief business economist at IHS Markit.

“We may be reaching the stage where growth has been strong for quite a few months and we are hitting a few ceilings in terms of degrees to which firms can expand capacity.”

Williamson said the PMI pointed to second quarter GDP growth of 0.7 percent, faster than the 0.5 percent predicted in a Reuters poll earlier this month. The PMIs had correctly indicated a 0.6 percent expansion last quarter.