Euro zone business growth flagging as trade fears rise

Latest PMIs point to third quarter economic growth of 0.4 per cent in euro zone


Euro zone business growth slowed more than expected this month as fears over a trade war with the United States and a weaker global expansion put another dent in optimism, a survey showed on Tuesday. But growth remained robust and as it was accompanied by rising prices the survey is unlikely to concern policymakers at the European Central Bank too much as they look to move away from their ultra-loose monetary policy.

IHS Markit’s euro zone composite flash Purchasing Managers’ Index (PMI), seen as a good guide to economic health, dipped in July to 54.3 from June’s 54.9, coming in below all forecasts. Anything above 50 indicates growth. If maintained, the latest PMIs point to third quarter economic growth of 0.4 percent in the euro zone, IHS Markit said. That is slightly weaker than the 0.5 per cent predicted in a Reuters poll last week. “July’s fall in the euro zone PMI comes as something of a disappointment but the index is still consistent with a decent pace of GDP growth,” said Jessica Hinds at Capital Economics. “All in all, today’s data are unlikely to deter the ECB from normalising policy but the process is likely to be extremely gradual.” The ECB guided markets for steady rates “through the summer” of 2019 at its meeting last month, when it also announced it would shut a €2.6 trillion bond-buying programme in December, ending its unprecedented stimulus scheme.

Germany’s private sector grew faster than expected in July, earlier figures showed, but French business growth eased more than predicted. France and Germany are the only two euro zone members to have flash numbers. -Reuters