Euro-Area Economy Lacking Momentum Adds to Brexit Concerns

The euro-area economy continued growing at a lackluster pace in June, ahead of the U.K.’s referendum on its European Union membership.

A Purchasing Managers Index for manufacturing and service activity was unchanged at 53.1 in June from a month earlier, London-based Markit Economics said on Tuesday. That compares with a preliminary reading of 52.8. Almost all the responses were collected before the British referendum, when it opted to quit the EU.

The PMI data point to an expansion in gross domestic product of 0.3 percent in the second quarter, according to Markit chief economist Chris Williamson -- half the pace of the three months through March. The lack of momentum is likely to be a particular concern for officials who are now bracing for the impact of Brexit on the region’s fragile recovery.

“Faster manufacturing growth was countered by a slowdown in the service sector, leaving the overall pace of expansion of business activity unchanged,” said Chris Williamson, chief economist at Markit. “The lack of any sign that the upturn is picking up speed will worry policy makers, especially as Brexit uncertainty looks likely to subdue growth in coming months.”

An index for the service industry fell to 52.8 in June from

53.3 in May, Markit said, a smaller decline than the preliminary report of a drop to 52.4. A manufacturing gauge rose to 52.8 from 51.5, a separate report showed on Friday.

Among major euro-area countries, France was once again the weakest performer, with PMIs pointing to a contraction in economic output. Indicators for Germany, Italy and Spain pointed to solid expansion. Data overall signaled a continued pick-up in employment, with job growth accelerating to a five-year high.

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