Markit's flash eurozone PMI at 17-month low

Markit’s flash eurozone composite purchasing managers’ index (PMI) fell to a 17-month low of 52.8 in June from 53.1 in May, below economists' expectations of a reading of 53.1.

The services PMI also fell in June, to an 18-month low of 52.4 from 53.3 in May, below forecasts of 53.4.

However, manufacturing PMI rose to a six month high of 52.6 from 51.5 in May, above expectations of 51.5.

Chris Williamson, Markit's chief economist, said the lacklustre economic growth in June was due to political uncertainty in Europe which caused business confidence and expansion to weaken.

He said economic growth in the second quarter is likely to reduce from the solid 0.6% expansion seen in the opening quarter of the year to about 0.3%.

“The good news is that demand is growing at a sufficiently strong pace to sustain reasonably robust hiring, but it’s not strong enough to generate inflationary pressures. Firms are having to soak up higher costs, notably for fuel and labour, but cut their own selling prices amid intense competition.

“A solid performance from Germany’s manufacturing economy looks to have helped drive a solid 0.4% expansion of the currency area’s single largest member state in the second quarter, but business activity in France remains in a far more fragile state and confidence has deteriorated further.”

Stephen Brown, European economist at Capital Economics, said: “Overall, the drop in eurozone composite PMI to a 17-month low will be worrying news for policymakers ahead of tomorrow’s UK referendum result.

“But PMI has been weakening for some time, suggesting that even if the UK votes to remain in the European Union a strong rebound is unlikely. As such, no matter what the UK referendum result, we still expect the European Central Bank to deliver another bolt of stimulus at some point later this year.”