Eurozone private sector growth in June: Spain improves, France contracts

This article was originally published in English

Eurozone private sector activity grew in June, exceeding previous estimateswhich indicates that the recovery phase is on the right track, albeit with significant variations between member countries.

The Hamburg Commercial Bank (HCOB) seasonally adjusted Eurozone Composite Output PMI, which reflects the situation of the service and manufacturing sectorsstood at 50.9 points, which is the fourth consecutive month above the 50.0 mark without changes. This is a slight slowdown in the pace of expansion compared with 52.2 in May, but slightly better than initial estimates of 50.8.

The upward adjustment is due to the revision of the rate of expansion in the services sector, with the Eurozone HCOB Services PMI at 52.8 in June, compared to the previous estimate of 52.6, but below the 52.3 in May. However, this is a the fifth monthly expansion consecutive service sector.

“Growth in the euro area can be fully attributed to the services sector,” commented Dr. Cyrus de la Rubia, Chief Economist at HCOB. According to De la Rubia, the eurozone services sector benefits from a high volume of tourists. The New Exports Index, which includes tourism, has continued to increase. increase since six months ago and is now almost two points above its long-term average.

The interest rate cut applied by the European Central Bank (ECB) in June finds some justification in the dynamics of price indices PMI Services HCOB. Input prices and prices charged to customers increased at the slowest pace in three years.

Almost all Eurozone countries with available composite PMI data recorded growth during June, with the notable exception of France.

Spain leads growth, boosted by tourism and interest rate outlook

Spain remained the fastest growing economy in the eurozone, with a strong increase in productionlikely driven by a strong tourist season and an improving interest rate outlook.

HCOB Spain’s services PMI index came in at 56.8 in June, revised up from 56.4 in the previous estimate and only slightly below May’s 13-month high of 56.9. This represents a 10-year high of 56.8 in June. the tenth consecutive month expansion of the Spanish economy. This is the tenth consecutive month of expansion of the Spanish services sector, supported by the strong customer demand National and international.

Employment in Spain increased for the twenty-first consecutive month at a faster paceSince the Companies expanded their workforce to meet current and projected demand. However, this increase in employment also translated into an increase in wage levels in June.

“Some panellists believe that activity will continue to increase due to lower inflation and interest rates within a year,” said Jonas Feldhusen, junior economist at HCOB. Feldhusen expects growth to be above the historical average in the second quarter, after the strong GDP revisions of the previous two quarters.

French private sector activity contracts amid election turmoil

France was an atypical case, with a weakening of business activity private sector growth for the second consecutive month. France’s HCOB composite PMI index showed a slight improvement from the previous month but remained below 50, indicating contraction.

“The upcoming elections have made the Service providers be less optimistic about future activity. In addition to be at its lowest level “Business confidence is significantly below its historical average over the past five months. Employment growth has weakened accordingly,” said Norman Liebke, economist at HCOB.

According to Liebke, the upcoming elections seem to be an important factor, especially since New orders have fallen sharply. French service companies have been working through pending orders in response to lower demandwhich explains the discrepancy between production indices and new orders.

On the other hand, although inflation French service prices is gradually declining, it remains a cause for concern due to the recent, historically high, increase in input pricesas companies report rising wage costs and raw material prices.