Euro area PMI index for industry falls again in June, economy likely to grow 2.1 pct in 2018

The euro area PMI for industry has continued its fall in June. The PMI for industry dropped for the sixth straight month, falling a further 0.5 points to 55, in line with consensus expectations. This is the lowest figure since December 2016. On the contrary, the index for the service sector rose again unexpectedly by 1.2 points to 55. It is now back at the level of last March.

The figures bear out the assumption that the weaker growth in the first quarter was not a one-off, noted Commerzbank in a research report. Industry continues to be on a downward trend. Meanwhile, the PMI for services, which in the past has shown close correlation with rate of change in real GDP, reveals that the underlying rate of growth is still slightly above the long-term average. Growth would probably stay subdued in the second half of the year.

For 2018 as a whole, the real GDP growth is expected to come in at 2.1 percent, stated Commerzbank. One major reason for deceleration is likely the euro area’s strong gains since early 2017. The resulting loss of price competitiveness would continue to hamper business for quite some time, especially in industry. U.S. President Trump’s protectionist policies are also a source of rising concern in the corporate sector. So far, though, the ECB has greatly ignored the weaker economic data. It lowered its growth projection for the year to 2.1 percent, but the ECB Council members, at the same time, are more confident that inflation would soon move steadily towards the bank’s target level of close to 2 percent.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Euro was bullish at 90.5473, while the FxWirePro's Hourly Strength Index of US Dollar was highly bearish at -108.546. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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