Eurozone June flash services PMI 52.4 vs 54.5 expected

<ul><li>Prior 55.1</li><li>Manufacturing PMI 43.6 vs 44.8 expected</li><li>Prior 44.8</li><li>Composite PMI 50.3 vs 52.5 expected</li><li>Prior 52.8</li></ul><p>On the balance of it, the fall in services activity isn't as stark as the French reading alone. However, it still leads to the euro area economy basically grinding to a halt towards the end of Q2. There was a cooling in inflation pressures but a weakening in demand conditions is largely outweighing that as the spring rebound falters towards the summer in Europe. HCOB notes that:</p><p>"If the ECB only had to control goods prices, then Frankfurt would toast the end of inflation, because even in June the PMI
survey shows that purchasing and selling prices have fallen significantly. Moreover, given the recession in manufacturing
indicated by the PMI, one would start with interest rate cuts. But this picture is incomplete. In the more important part of the
economy, the private services sector, prices continue to rise, and that's why the core rate of inflation has been so slow to
decline."
</p><p>"In addition to the persistent discrepancy that has already been observed for several months between manufacturing on the
one hand and services on the other, there are also clear regional differences. In France, for example, activity in the service
sector contracted in June according to the PMI survey, whereas in Germany it continues to expand, albeit at a slower pace.
This is also reflected in new orders, which are falling in France but rising in Germany – again at a declining rate. High
<a href="https://www.forexlive.com/terms/i/inflation/">inflation</a> and more difficult financing costs are cited as reasons for this weakness in France, which may also have suffered
economically from intense strike and protest activity in spring."
</p><p>"After Eurozone GDP fell for the second time in a row in the first quarter, the probability has increased somewhat that the
GDP change will again carry a negative sign in the current quarter, due in part to weak services activity in France. Even if
our baseline scenario of slightly positive Eurozone growth in the second quarter still becomes reality, the downward trend in
the Composite PMI points to a difficult second half of the year as companies across all sectors face deteriorating order
books."</p>

This article was written by Justin Low at www.forexlive.com.