Eurozone Private Sector Growth Slows Unexpectedly In May

(RTTNews) - The euro area private sector recovery suffered a setback in June as business activity and employment growth softened due to weak orders, preliminary results from the purchasing managers' survey by S&P Global showed on Friday.

The flash HCOB composite output index fell unexpectedly to 50.8 in June from 52.2 in May. The score was below forecast of 52.5. Nonetheless, a reading above 50.0 indicates expansion.

Although the sector expanded for the fourth straight month, the increase in output was the weakest since March to signal a loss of growth momentum.

Growth was limited to the service sector as improving conditions in the manufacturing sector was reversed in June.

The flash services Purchasing Managers' Index fell to a three-month low of 52.6 from 53.2 in May. The score was forecast to rise to 53.5.

At 45.6, the manufacturing PMI fell to a six-month low from 47.3 in the previous month. The reading was expected to rise to 48.0.

There was a renewed fall in new orders, which dropped for the first time in four months. That said, the pace of decline was only slight. The decrease in new business from abroad was the sharpest since February, the PMI survey showed.

The rest of the Eurozone registered a further solid rise in activity, despite the rate of growth easing to a four-month low. In line with the slower growth in business activity, the rate of job creation eased in June. With new orders returning to contraction territory, output was supported by work on outstanding business.

Consequently, backlogs of work continued to be depleted solidly, with the reduction the most marked since February.

The deepening downturn resulted in more pronounced reductions in purchasing activity and holdings of both purchases and finished goods. Regarding prices, input cost inflation eased for the second straight month to the slowest in the year-to-date period. In line with the picture for input costs, output price inflation eased to an eight-month low. After having hit a 27-month high in May, business confidence weakened amid the fall in new orders. Optimism was the softest in four months. The GDP estimate for the second quarter indicates a slight downgrade but still points to positive growth of 0.2 percent compared to the first quarter, Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said.

Germany showed a third consecutive monthly increase in business activity, but the rate of growth slowed amid a renewed fall in new orders. Meanwhile, the French private sector contracted the most since February.

Germany's composite output index posted 50.6 in June, down from 52.4 in May and was lower than the forecasted 52.7. The score fell from a 12-month high signaling a noticeable slowdown in the rate of growth.

The services PMI fell to 53.5 in June from 54.2 in the previous month and was lower than the expected 54.4. Likewise, the manufacturing PMI dropped to 43.4 from 45.4. The reading was forecast to rise to 46.4.

France's private sector contracted on renewed decrease in new orders. The headline HCOB flash composite output index fell unexpectedly to 48.2 in June from 48.9 in May. The score was seen at 49.5.

The flash services PMI posted 48.8, down from 49.3 in the prior month. The reading was expected to rise to 50.0. The manufacturing PMI slid to 45.3 from 46.4 in April. The expected reading was 46.8.