Eurozone's July business growth exceeds expectations: PMI

[LONDON] Eurozone business growth accelerated at the end of last month as companies largely put the Greek debt crisis behind them, suggesting the bloc's economic recovery is on track, a survey showed on Wednesday.

Greece's flirtation with bankruptcy had threatened to wreck the currency union, but Athens agreed a framework bailout plan with its European Union partners in mid-July in exchange for stringent reforms and budget austerity.

With conditions and sentiment improving in the bloc after the deal, Markit's July final Composite Purchasing Managers' Index (PMI) beat an earlier estimate of 53.7, settling at 53.9.

That was shy of June's four-year high of 54.2, but the index has now been above the 50 mark that separates growth from contraction since mid-2013.

The composite PMI pointed to third-quarter expansion of 0.4 per cent, Markit said, in line with the expectations for the previous three months but less than the 0.5 per cent median forecast in a Reuters poll taken two weeks ago. "The eurozone economy showed reassuring resilience in the face of the Greek debt crisis in July," said Chris Williamson, Markit's chief economist. "With survey results like these, the European Central Bank will no doubt see the euro zone recovery as remaining firmly 'on track', supporting the view that the region looks set to grow by at least 1.5 per cent in 2015." Services, which dominate the bloc's economy, also performed better than first thought. A PMI covering the sector came in at 54.0, above the flash 53.8. In June, it was 54.4, better than a four-year high.

However, as in every month since early 2012, businesses cut prices to encourage business - although only slightly. The composite output price sub-index rose to 49.8 from June's 49.4, its highest reading since it fell below 50 in April 2012.

The price discounting and steady growth allowed service companies to build up a surfeit of orders, at the second fastest pace since mid-2011. The backlogs of work index rose to 51.1 from 50.8.

REUTERS