Eurozone: PMI drops in June, but rounds out strong quarter - ING

Optimism in the Eurozone continued despite a small reality check in June explains Bert Colijn, Senior Economist at ING. Businesses experienced the strongest quarter in six years although the composite PMI dropped to its lowest reading in five months, he further adds.

Key Quotes

“With consumer confidence reaching the highest level since 2001 this month, the europhoric mood extends into the summer months.”

“With just a week to go in this quarter, all signs are pointing towards a strong GDP reading. This quarter’s confidence numbers have remained very strong, pointing towards a continuation of solid growth in the Eurozone. Businesses proved to be slightly more cautious in June, mainly due to slower growth in new orders in the service sector. The manufacturing PMI is still indicating strong improvements. New orders in manufacturing are growing at the fastest pace since February 2011 and backlogs of work continue to increase.”

“While industrial production has disappointed so far this year, catch-up growth in manufacturing output seems imminent over the coming months. Interesting to note is that export growth continues to improve and is rising at the fastest pace in six years as well. While geopolitical uncertainty is high and the euro has recently strengthened, export orders are still profiting from recent weakness in euro and the global cyclical upturn.”

“While the PMI for services disappointed somewhat this month, the outlook remains positive for the months ahead. Consumer confidence is back at levels last seen when people still had francs, marks and pesetas in their wallets, which is supportive of faster consumption growth. At the same time, businesses continue to hire new staff near the fastest pace in decades. This should underpin continued strength in the service sector for the coming months. The picture that surveys are painting is rosy and while 2017 indeed looks like a strong year for Eurozone growth, the question remains if they aren’t overselling it.”