The European Central Bank (ECB) is under pressure to support growth in order to help the economy bounce back after being dented by global tensions and political uncertainty from Brexit. By the end of September, the ECB will either cut its deposit rate or ease its forward guidance further by pledging to keep interest rates lower for longer, according to a majority of economists in a Reuters poll. Analysts suggest the latest IHS Markit’s Eurozone Composite Final Purchasing Managers’ Index (PMI) will only reinforce this pressure, as it nudged up only slightly last month. The PMI came in at 52.2 in June from May’s 51.8, close to the 50 mark separating growth from contraction.
IHS Markit said the survey points to gross domestic product rising just over 0.2 percent in the second quarter.
Nicola Nobile at Oxford Economics said: “We continue to see the ECB headed for another dose of monetary policy easing in September as it attempts to reinvigorate the region’s economy.”
Germany, France and Spain helped a PMI covering the wider eurozone services industry bounce to 53.6 from May’s 52.9, a counterweight to a fifth month of contraction in manufacturing.
It was a welcome reading for the eurozone after factory activity was revealed to have contracted for the fifth month in a row.
The European Union’s nomination of IMF chief Christine Lagarde to replace Mario Draghi at the helm of the ECB has reinforced expectations for easier monetary policy going forward.
IHS Markit’s final manufacturing Purchasing Managers’ Index (PMI) for last month was 47.6, below an earlier flash reading of 47.8.
Monday’s factory PMI indicated there will be a slow start to the second half for manufacturers as new orders fell for a ninth month, stocks of raw materials were depleted again, backlogs of work were run down and headcount was reduced for a second month.
While most of the forward-looking services indexes were positive they remained weak, and new export business — which includes trade between member countries — fell for a tenth month.
The sub-index registered 49.4 compared to May’s 48.2.
The composite future output index fell to 59.2 from 59.8, one of its lowest readings in over four years.
Chris Williamson, chief business economist at IHS Markit, said: “Eurozone manufacturing remained stuck firmly in a steep downturn in June, continuing to contract at one of the steepest rates seen for over six years.
“The disappointing survey rounds off a second quarter in which the average PMI reading was the lowest since the opening months of 2013.”