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Fall in Euroarea PMIs muted, points to third-quarter economic growth of 0.3 pct

Markit’s flash eurozone composite purchasing managers’ index fell less than expected in July. Eurozone economy showed surprising resilience post Brexit vote. According to the Markit, Eurozone Flash PMI slipped to 52.9 from 53.1 in June, hitting an 18-month low but better than expectations for a reading of 52.5.

The services PMI came in at 52.7, down from 52.8 in June, also marking an 18-month low but ahead of expectations of 52.5. Meanwhile, the manufacturing PMI nudged down to 51.9 in July from 52.8 the previous month. This marked a two-month low and was a touch below the expected reading of 52.0.

Stronger performances in the two big economies of Germany and France offset weakness in smaller countries, a survey showed on Friday. If maintained at this level, the composite PMI points to third-quarter economic growth of 0.3 percent, Markit said, but a sharp slowdown from the 0.6 percent growth seen at the start of the year.

"It's a pretty pleasant surprise that the fall (in the euro zone PMI) was so muted. It suggests that Brexit is unlikely to trigger the substantial slowdown that many people are predicting," said Ben May at Oxford Economics.

The slight loss of momentum may be of concern to policymakers at the European Central Bank who have been trying to stimulate faster growth. After the ECB kept policy unchanged on Thursday, its President Mario Draghi said the central bank was prepared to take more action to lift inflation and economic growth if necessary.

“Policymakers will be reassured by the resilience of the PMI in the immediate aftermath of the Brexit vote, but the fragility of the recovery leaves plenty of room for speculation about further stimulus later in the year,” said Chris Williamson, Chief Economist at Markit.

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