According to the first estimate, which is based on around 85% of the usual monthly replies, euro zone manufacturing PMI dropped from 45.1 to 44.8 in June, exactly in line with expectations. National details show that the pace of decline slowed in France (45.3 from 44.7), while the downturn accelerated in Germany (44.7 from 45.2) and elsewhere in the euro area (outside France and Germany). Output in the euro zone manufacturing sector contracted at its fastest pace in more than three years (44.4 from 44.6). New orders fell for a thirteenth consecutive month, but at a slightly slower pace. The euro zone services PMI, on the contrary, surprised on the upside of expectations. According to the first estimate, euro zone services PMI rose from 46.7 to 46.8 in June, while a decline to 46.4 was forecast. In France, euro zone services PMI rose from 45.1 to 47.3, while German services PMI fell from 51.8 to 50.3. Also elsewhere in the euro zone, services PMI weakened further in June.
Nevertheless, within the services sector, business expectations showed the largest month-on-month deterioration since the Lehman Brothers collapse, falling from 57.4 to 50.8, suggesting the more weakness is likely in the coming months. Overall, the composite index stabilized at 46.0, while most had expected business sentiment in the euro area to weaken further. Markit added however that the PMI’s suggest euro zone GDP to have fallen by 0.6% Q/Q in the second quarter of 2012. While it is certainly not a good outcome, at least the downturn is not worsening further, but the spreading of weakness across the region (especially to Germany) is a poor
sign looking forward.