Eurozone PMI Rose in June, Tighter ECB Policies at Bay

The eurozone business growth climbed higher in June that incites the European Central bank to tighten their policies. However, purchasing managers confidence is slowly waning since late 2016 based on the survey.

There is a fast growth in the currency growth along with the heightened pressure on the rates that ensures the policymakers of the central bank referring back to their statement last months, saying that the bond purchase scheme will be stopped by the end of the year.

Yet, the ECB said on June 14 that the interest rate hike is still far off amid balanced announcement implying economic uncertainties.

Britain is in a similar condition as the economy grows resilient as it big services industry increase last month at the fastest rate since October. This suggests that the economy may be strong enough for the BoE to proceed with the expected rate hike in August.

The final Composite Purchasing Managers’ Index of the eurozone by the IHS Markit gives a positive indication of growth, rising to 54.9 in June from 54.1 in May. Above the 50 mark separates growth from contraction.

It exceeded the previous flash reading of 54.8 yet the latest PMI is still behind this year. The future output index dropped to 63.4 from 63.7 that can be used to monitor business confidence. It has been the lowest reading since November 2016.

Meanwhile, German services reached a four-month high in June and private sector activity in France also soared higher. This was supported by a rebound of the services sector that influences slower growth in manufacturing business.  

The manufacturing PMI data on Monday showed a sluggish growth of factories reaching an 18-month low. The decline was continuous for six months with escalating worries on trade barriers and their impact on economic activity. The rise in numbers came about despite sharp adjustments of firms to higher costs.

The services output prices PMI bounced to 53.2 from 52.0, recorded as a five-month high.

Meanwhile, eurozone inflation climbed to 2.0 percent in June, which has been the highest rate over the year, much higher than the ECB target according to the preliminary data from Eurostat published last week.