The Markit flash PMI data for June showed a strong rebound in Eurozone momentum after disappointing figures for May. Eurozone activity reached a four-year high, while individual figures for Germany and France also showed significant improvement over the previous month.
France, where growth had been lagging the rest of the Eurozone for much of the past year, showed the biggest improvement. Manufacturing PMI entered expansionary territory for the first time since April 2014, rising to 50.5 in June from 49.4 in May. Consensus estimates were for a figure of 49.6. Services PMI rose to its highest level since August 2011, coming in at 54.1, against expectations of 52.6 and higher than May’s 52.8. The main driver of growth was the private sector, particularly in the services sector.
German PMI was also encouraging with both manufacturing and services flash PMI accelerating in June. Manufacturing PMI rose to 51.9 from 51.1 previously and versus estimates of 51.2. Services PMI jumped to a 3-month high of 54.2 from 53.0 previously and versus estimates that it would stay unchanged. Manufacturers benefited from accelerating new export orders but the services sector experienced a slower rise in new business orders.
For the Eurozone as a whole, activity increased in both services and manufacturing with the composite PMI rising to a four-month high of 54.1 in June from 53.6 in May. The manufacturing PMI for June rose slightly to 52.5 from 52.2, and services PMI rose to 54.4 from 53.6. The data points to second quarter GDP growth of 0.4% for the euro area and provides further evidence that the European Central Bank’s asset purchase program is taking effect. Despite the strong figures however, order books slowed during the month as growing uncertainty over the stalemate with the Greek debt talks started to bite into future outlook. The euro’s recent recovery against the dollar may also put a limit on the pace of Eurozone growth in the months ahead.
Elsewhere, the HSBC flash manufacturing PMI for China rose to a three-month high in June, but at 49.6, the figure was still in contractionary territory. Total new work and purchasing activity rose slightly during the month but employment levels continued to fall, signalling lower growth expectations for the future.
The better-than-expected figures for the Eurozone failed to lift the single currency, which dropped below the 1.13 handle to trade around 1.1224 against the dollar in mid-European session. The euro also fell against the pound to 0.7113 and was down at 138.79 against the yen.