Signs of a recovery in the euro zone's dominant services economy took a backwards step in June but business optimism hit a near two-year high on hopes that the worst is over, surveys showed today.
Markit revised up its Eurozone Services Purchasing Managers Index in June to 44.7 from the flash estimate of 44.5, but this was down from May's 7-month high of 44.8.
Economists had expected 44.5 and this marks the 13th consecutive month the index has been below the 50 mark that divides growth from contraction.
The euro was unmoved by the data.
There was evidence of divergence in the big four economies in the region.
Earlier data showed activity in Germany's services sector fell at the same pace as in May, while in France and Spain the sector shrank at a slower pace. The rate of contraction accelerated in Italy.
However, firms ranging from banks to restaurants were optimistic and the business expectations index rose to 62.3 from May's 59.1, a level not seen since July 2007.
Data from Britain showed its dominant services sector expanded for a second month in June but the pace of recovery slowed as new business contracted.
The euro zone economy shrank a record 2.5 per cent quarter-on-quarter in the first three months of this year. But it is expected to contract much less severely in the second quarter, with a return to growth pencilled in for the last three months of this year.
The European Central Bank left interest rates at 1 per cent yesterday, and the market sees them staying there until October next year at least as the ECB battles to boost the flagging economy.
The euro zone composite index, which includes manufacturing data released on Wednesday, rose to a 9-month high of 44.6 last month, revised up from the flash estimate of 44.4 and above May's 44.0. Economists had forecast 44.4.
The composite employment index rose to a 5-month high of 42.2, up from May's 40.7, but showed that firms are still slashing jobs in an effort to cut costs and stay afloat.
Meanwhile, the composite output price index remained solidly sub-50, suggesting firms are having to slash prices to woo customers.
Official euro zone inflation fell 0.1 per cent in June, the first time prices have dipped into the negative territory in the bloc, and economists expect it to fall further over the summer months before climbing in the later stages of the year.
Reuters