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Businesses in the eurozone grew at the slowest rate so far this year in June while France’s slump continued; suggesting that further radical stimulus measures from the European Central Bank may be needed.
Markit’s Composite Purchasing Managers’ Index (PMI), based on surveys of thousands of companies across the region and seen as a good indicator of growth, came in at 52.8, down from May’s 53.5 and the weakest for six months. However, new orders poured in at the fastest pace in over three years, suggesting growth will accelerate in the second half of the year.
Activity in France, the bloc’s second-biggest economy, shrank at the fastest rate in four months and even in Germany, the backbone of the common currency area, the pace of growth eased.
The French composite PMI came in at 48.1, while the reading for its services sector was 48.2. Both readings were a four-month low.
“This low level is becoming a very serious concern. Not only are the PMIs below the expansion threshold for the second month in a row; but, more importantly, France is now way behind the rest of the eurozone,” analysts at BNP Paribas said.
Chris Williamson, chief economist at Markit, said the picture for the eurozone was rosier, despite the poor headline figure
“At first glance, June’s PMI survey results make grim reading and raise worries that the euro area’s recovery is already fading,” he said.
“Dig a little deeper, however, and there are grounds for optimism. With new orders rising at the fastest rate for three years, the pace of economic growth should also pick up again as we move into the second half of the year.”
A composite sub-index covering new orders jumped to 53.1 from 52.6, its highest reading since May 2011. But some of that business was generated by firms cutting prices again.
The data will be disappointing reading for the European Central Bank’s Governing Council members, who are expected to have made no change to monetary policy when they announce their latest decision on Thursday morning.
ECB President Mario Draghi announced a raft of measures last month to counter the threat of deflation and support the recovery, including cutting the deposit rate below zero and offering more long-term loans aimed at boosting bank lending to businesses.
Annual consumer inflation was 0.5pc in June, further highlighting the bloc’s feeble economic state as households avoid spending and retailers try to keep down prices to entice shoppers.