June’s eurozone PMI rose slightly in industry and sharply in the services sector. Although the overall index for both sectors in the second quarter was only marginally above the January-March average at 47.8 points, the June figure of 48.9 points represented a clear jump upwards. Particularly in conjunction with the good performance of industrial production in March and April, we see this as confirmation of our forecast of sequential GDP growth of 0.2% in the second quarter (in 2013 as a whole we still expect the eurozone economy to shrink by 0.3%).
In Germany the slightly less favorable survey results in industry in June went hand in hand with a sharp improvement in the services sector. The composite index climbed to 50.9 points, thus remaining above the 50-point expansion threshold. Together with the healthy start of industrial production in the second quarter, this points to a quarter-on-quarter increase in GDP of at least 0.5% despite the flood aftermath. Over the year as a whole we still regard average economic growth of 1% as achievable.
Following the recent wave of criticism of France, highlighting inadequate pace of reform, insufficient consolidation efforts or waning attractiveness as a business location, in economic terms at least the marked improvement in sentiment is a reassuring ray of light. The industrial PMI is now at its highest level since March 2012 and the composite index rose strongly on May to 46.8 points. This by no means indicates that everything is “hunky-dory”, but a small increase in overall output in the second quarter now looks possible. Over the year as whole it will in our view stagnate.