Euro area growth unexpectedly quickens as slowdown risks persist

[LONDON] Economic momentum in the euro area unexpectedly picked up in June, although worrying signs persist for the common-currency region, IHS Markit said Friday.

A composite purchasing managers' index climbed to 54.8 from 54.1 in May. The median estimate in a Bloomberg survey was for a drop to 53.9. The increase was driven by a jump in services growth, while a slowdown in manufacturing persisted.

"The details of the survey warn against any complacency," said Chris Williamson, chief business economist at Markit. "While the June upturn provides some hope that the weakening of official data earlier in the year may have overstated the region's weakness, the risks remained tilted towards a further slowdown in the second half of the year."

That warning comes just a week after European Central Bank officials said they will end bond purchases this year, signalling the institution's first steps on the path away from extraordinary stimulus. Following the ECB's announcement, President Mario Draghi said that the recent "soft patch" may last longer, but that didn't change the view of underlying momentum.

Manufacturing output growth in the region slumped to the lowest since November 2016, Markit said. The pace of exports also remained subdued.

Reports earlier Friday showed a reading for Germany unexpectedly climbed to 54.2, while the French gauge increased to 55.6. Both were driven by stronger growth in services.

BLOOMBERG