LONDON, (Reuters) - Euro zone factory growth picked up slightly last month but remained tepid as uncertainty around Greek debt talks — and the country’s possible exit from the bloc — swept across the region, a survey found on Wednesday.
Amid speculation Athens would fail to make Tuesday’s 1.6 billion euro repayment to the International Monetary Fund, expectations Greece would crash out of the currency union jumped.
A Reuters poll on Monday said there was a 45 percent likelihood it does leave, up from just 30 percent the week before.
Those fears kept Markit’s final euro zone manufacturing purchasing managers’ index (PMI) in check. It nudged up to a 14-month high of 52.5 last month from May’s 52.2, in line with a preliminary reading published before the fears intensified.
Any reading above 50 indicates growth and an index measuring output that feeds into the composite PMI, due on Friday and seen as a good guide to growth, came in at 53.6, just above the flash 53.5 and May’s 53.3.
“The overall pace of expansion remains insipid rather than impressive. This is perhaps not surprising given the heightened degree of uncertainty surrounding the Greek debt talks that was seen during the month,” said Chris Williamson, Markit’s chief economist.
Further expansion was also curtailed by lackluster growth in Germany and France, the euro zone’s two biggest economies, and Markit said manufacturing provided only a modest boost to the wider economy.
Despite weak growth and demand, factories raised prices at the fastest rate since late 2013. The output price index rose to 51.0 from 50.0.
That will be welcome news for the European Central Bank, which earlier this year embarked on a trillion-euro quantitative easing program to drive up inflation and growth. Official figures on Tuesday showed prices in the bloc rose 0.2 percent in June.
Editing by Catherine Evans