Euro-Area Output Makes Subdued Improvement in June, PMI Shows

(Bloomberg) -- The euro-area economy showed some signs of stabilization in June, but it may not be enough to assuage the European Central Bank’s concerns.

A pickup in a measure of activity was tempered by continued weakness in sentiment, which is at the lowest in five years.

The surveys of purchasing managers point to growth of 0.2% in the second quarter, a weak pace. Growth was driven by services, while manufacturing continued a downturn. Sentiment deteriorated in both sectors.

While the performance of Germany and France is improving, there’s growing concern that the rest of the region is sliding closer towards stagnation, according to the report. Export orders fell during the month, and inflationary pressures eased.

“Concerns about weaker economic growth at home and in export markets, rising geopolitical risks and trade wars continue to dominate the picture and dampen business spending, investment and sentiment,” said Chris Williamson, chief business economist at IHS Markit. “The pace of expansion will continue to be restrained by uncertainty and risk aversion.”

ECB President Mario Draghi said earlier this month that additional stimulus will be needed “in the absence of any improvement” to the outlook for growth and inflation. Central bank officials say an interest-rate cut would be the first move if needed.

To contact the reporter on this story: Jill Ward in London at jward98@bloomberg.net

To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Lucy Meakin

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