Steady business growth seals off modest second quarter

Tue Jul 5, 2016 6:51am EDT
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By Sumanta Dey

(Reuters) - Euro zone business growth held steady in June, but the modest pace suggested economic growth in the second quarter was half the rate of January-March, even as a rebound in Italy and rapid acceleration in Spain brightened the outlook.

In France, the euro zone's second largest economy, data showed both services and manufacturing contracting.

The majority of the surveys were completed before Britain voted on June 23 to leave the European Union, meaning the after-shocks of the referendum have yet to be reflected in the data.

Of ongoing concern to policymakers at the European Central Bank, whose years of ultra-easy monetary policy has failed to boost inflation anywhere close to its 2 percent target ceiling, is that firms were still slashing prices to drum up business.

Markit said its latest composite Purchasing Managers' Index for the euro zone, steady at 53.1 in June, pointed to GDP growth of 0.3 percent between April-June, just half the 0.6 percent rate clocked in the first quarter.

But there were some notable bright spots in the data.

Italian businesses returned to growth, and a surge in Spain's service sector, where firms hired faster in June than in any month since 2007, means the bloc's third and fourth largest economies may be finally beginning to pull some weight.

Spain's unemployment rate, at 21 percent in the first quarter, is among the highest in developed economies.   Continued...

The famous euro sign landmark is pictured outside the former headquarters of the European Central Bank (ECB) in Frankfurt, Germany, January 19, 2016.    REUTERS/Kai Pfaffenbach