Growth in the eurozone is at its weakest level in nearly two years — and it is mainly Britain’s fault, according to the latest PMI data released by Markit on Tuesday morning.
On top of that, Britain’s vote to leave the European Union could bring any recovery to a total standstill and potentially send the eurozone into a new economic crash.
Markit’s PMI reading for June showed that the continent’s composite data — a mix of both services and manufacturing — hit 53.1 in June, up from the flash estimate, but flat from May’s reading, a sign that things in the eurozone are struggling to pick up.
Britain’s industries suffered their worst quarter in more than three years after the reading came in at
52.3 for June from 53.5 the previous month.
UK services PMI was particularly bad:
Services are the bulk of the UK economy, and that reading was taken before Britain decided to leave the European Union last week. As a result, things are likely to get substantially worse when the next reading comes in next month.
The eurozone-wide reading for the services sector came in a 52.8, again above the flash reading which was 52.4. It was, however, lower than the 53.3 reading in May, suggesting that the sector is going backwards.
The purchasing managers index (PMI) figures from Markit are given as a number between 0 and 100. Anything above 50 signals growth, while anything below means a contraction in activity — so the higher the better.
It was not just the eurozone as a whole that got a reading on the state of industry. All of the largest individual economies in the single currency area got a breakout reading for their services sector, and they were a mixed bag.
Here is a look at the services sector in some of the eurozone’s biggest economies:
- Germany — 53.7, substantially lower than the 55.2 reading in May. June’s number was a 13-month low.
- France — A fall from 51.6 in May, to 49.9 in June. That means that France’s service sector is back in contraction.
- Italy — 51.9, a return to growth following May’s reading of 49.8.
- Spain — 56, up from 55.4 last month. That coincided with the fastest employment growth in almost nine years.
Here is Markit’s chart showing the broad trend in eurozone PMI data:
And here is what Markit’s chief economist Chris Williamson had to say about the data:
“The lack of any sign that the upturn is picking up speed will worry policymakers, especially as ‘Brexit’ uncertainty looks likely to subdue growth in coming months. All of the manufacturing responses and 90% of the service sector replies for June were received prior to the UK’s EU referendum result, so any potential ‘Brexit’ impact is yet to appear.
“France remained a key concern, slipping back into decline in June as Germany once again reported solid growth and upturns gathered pace in both Italy and Spain, the latter shrugging off worries about the recent political stalemate.”