The eurozone's private sector saw fairly tepid growth this month and without the support of Germany and France would have slipped back into contraction, business surveys showed on Thursday. Growth in the bloc's dominant service sector was much slower than in recent months while manufacturers also applied the brakes as new orders declined for the first time in nearly two years.
The Flash Markit Eurozone Services Purchasing Managers' Index (PMI) fell to 54.2 in June from May's 56.0, its lowest level since December, and missing expectations for 55.5. But it was the 22nd month the index, which measures the activities of companies ranging from banks to hotels, has been above the 50 mark that divides growth from contraction.
The flash manufacturing PMI fell to 52.0 from 54.6 in May, its lowest level since December 2009 and much lower than consensus expectations in a Reuters poll for 53.8, while the output index slumped to 52.4 from 55.2, the lowest since September 2009. "There is a broad-based slowdown. When you strip out France and Germany from the eurozone numbers, the rest of the region slipped back into contraction," said Chris Williamson, chief economist at survey compiler Markit. "It is a very worrying trend given that the periphery especially needs to grow as part of the debt reduction plans. There was growth anticipated there to bring in extra revenues."
Greece, Ireland and Portugal still face years of economic purgatory after being forced to go cap in hand for bailouts from the European Union and International Monetary Fund to stave off defaulting on their debts. Euro zone governments are currently discussing a second bailout package for Greece and there are fears that any debt default by Athens would wreak havoc on other members of the 17-nation bloc. The eurozone composite PMI, a broader measure of the private sector which combines the services and manufacturing data, fell to 53.6 from 55.8, well below forecasts for 55.1.