2017.06.2710:00:00UTC+00Eurozone Growth Likely To Slow Slightly In H2: Capital Economics

The fall in the forward-looking components of the latest purchasing managers' survey suggest that Eurozone growth might slow slightly in the remaining half of this year, Jessica Hinds, an economist at Capital Economics, said.

The euro-zone composite PMI dropped to a five-month low of 55.7 in June from 56.8 in May, data released by IHS Markit showed on June 23.

The fall was driven by the services component, while the manufacturing PMI rose to its highest level since April 2011.

Despite this decline, the PMI still indicated that economic recovery continued at a healthy pace in the second quarter, the economist observed.

Moreover, the average PMI reading for the second quarter was above the reading of 55.6 seen in the first quarter. The score was also the highest since the first quarter of 2011.

"On the basis of past form, this is consistent with quarterly GDP growth of at least 0.6 percent, the same as in the March quarter," Hinds noted.

Private sector growth slowed in both France and Germany, down to five- and four-month lows, respectively, largely reflecting weaker rates of service sector expansion.

Among the forward-looking components, the decline in the new orders sub-index reflected weaker new business growth in the service sector.

The future output index slid to a 5-month low of 66.0 in June from 68.0 in May.

"But, they are both still at high levels and consistent with a decent pace of quarterly growth," the economist said.

Hinds also said that the survey data supported the view that price pressures are likely to remain subdued in the coming months.

"Overall, the euro-zone Composite PMI still supports our view that the euro-zone economy will expand by about 2 percent this year as a whole," the economist predicted.

"But with price and wage pressures subdued across much of the region, we doubt that the ECB will move to tighten policy until 2019," Hinds added.