The European purchasing managers’ indices have dropped slightly in June but still continue to indicate a sound economic situation for the Eurozone in Q2. The purchasing managers’ assessment in Q2 was on average better than at any point since 2011. The slight fall in sentiment in June hardly changes anything. After the improvements in recent months, the minor current correction is not surprising. Overall, economic growth is therefore likely to be relatively strong again in Q2, based on the survey data available.
The cumulated composite index for the Eurozone fell from 56.8 to 55.7 index points – the lowest level for five months because the service sector’s mood barometer dropped slightly, whereas the index for industry climbed to its highest level for 73 months. The order intake situation and employment prospects are without exception regarded as good while company price pressure remains limited.
German purchasing managers continue to be confident in June despite the fall in the mood barometers for industry and services. The composite index fell from 57.4 index points in the previous month to its current level of 56.1. This is the lowest value since February. Overall, the assessment of the economic situation remains more than robust. On average, the mood barometers point to strong economic momentum again this quarter. While purchasing managers state that industrial production could increase significantly once again, the rise in service sector business activity dampened somewhat. A similar picture is emerging for assessments of incoming orders. As far as the price side is concerned, cost pressure remains moderate. According to Markit, the increase in input prices will drop for the third month in succession, which is partly due to the strong euro. Growth in sales prices was also lower.
The French economy also seems to remain in fine fettle, based on survey findings. While the composite index recorded a decline here as well, falling from 56.9 index points last month to 55.3 index points in June, the continued high level offers hope that economic growth will be sustained. After all, the average index value in Q2 was higher than at any point since 2011. While French industry sentiment also increased on the month, the index for service providers fell slightly. The assessments of the order intake situation and employment prospects were once more very positive, while the growth in manufacturing was slightly weaker than in the previous month. There is no sign of increased inflation pressure; rising input prices have been passed on only by manufacturers, while service providers are reporting declining sales prices.