One Crucial European Economic Indicator Continues To Get Less Ugly

eurozone pmi

The global financial markets are selling off thanks to weak Chinese economic data and concerns that the Federal Reserve could start scaling back its stimulative monetary policies.

Spain also completed a bond auction that was met with weak demand. This reminded some of the ugliness experienced during the height of the euro zone’s debt crisis.

But, there was one somewhat encouraging economic report today: eurozone purchasing managers index (PMI).

The Flash, or preliminary, reading for June climbed to a 15-month high of 48.9, up from 47.7 in May.

While any reading below 50 signals contraction, the improving number is a sign that things are getting worse at a slower pace.

The manufacturing subcomponent improved to 48.7 from 48.3 and the services subcomponent improved to 48.6 from 47.2.

Here’s some commentary from Markit’s Chris Williamson:

“The flash PMI indicates that the Eurozone contracted again in June, rounding-off another weak quarter, but there are reassuring signs that the downturn is continuing to ease.

“The survey data suggest that GDP is likely to have shrunk by 0.2% in the second quarter, similar to the fall seen in the first three months of the year and extending the region’s recession into a record seventh successive quarter.

“Encouragingly, however, the rate of contraction has eased over the course of the second quarter, with the decline in June the smallest for 15 months. At this rate, the region could stabilise in the third quarter and return to growth in the fourth quarter.

“It is particularly welcome news that the rate of decline outside of France and Germany has slowed sharply in recent months, and is now the weakest for two years. The rate of contraction has also slowed sharply in France, while Germany is showing signs of faster, albeit still modest, growth.

“Euro area policymakers will no doubt be encouraged by these improving indicators, suggesting the ECB will see no need for any further action in the near term.”

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