Euro-Area PMI Surveys Signal Growth Doubled in Second Quarter

Euro-area manufacturing and services growth point to a strengthening economy in the second quarter, even as activity cooled in June.

Growth in the 18-nation economy may have accelerated to 0.4 percent from 0.2 percent in the first quarter, London-based Markit Economics said in a statement today, citing its monthly Purchasing Managers’ Index. While a gauge for both industries slipped to 52.8 in June from 53.5, it’s still above the 50 mark that indicates growth.

“At first glance, June’s PMI survey results make a grim reading and raise worries that the euro area’s recovery is already fading,” said Chris Williamson, chief economist at Markit. “Dig a little deeper, however, and there are grounds for optimism.”

New orders are expanding at the fastest rate in three years and employment has risen for the previous three months, Markit said, adding to signs that the euro area’s fledgling recovery is becoming more sustained.

A measure of services activity fell to 52.8 in June from 53.2, Markit said today. Earlier this week, it released data showing manufacturing slipped to 51.8 from 51.9.

ECB Decision

European Central Bank officials are meeting in Frankfurt today to assess the region’s economic outlook. Last month, they cut the benchmark interest rate to a record-low 0.15 percent, took the deposit rate below zero and unveiled a new lending program aimed at boosting credit supply.

The Frankfurt-based institution will announce its policy decision at 1:45 p.m. Economists in a Bloomberg News survey predict borrowing costs will remain unchanged.

While expansion in Germany, the region’s largest economy, is slowing and France has entered another downturn, it is “encouraging to see solid rates of economic growth being signaled for Spain and Italy,” Williamson said. Euro-area growth should “pick up again as we move into the second half of the year,” he said.

The ECB forecasts gross domestic product will increase 1 percent this year, 1.7 percent in 2015 and 1.8 percent in 2016. Eurostat will publish a preliminary reading of second-quarter output on August 14.

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