Eurozone economic growth speeds up

Eurozone business activity rose at its fastest pace in four years in June, boosted by higher spending by consumers and businesses, a survey has indicated.

The final Markit composite eurozone Purchasing Manages’ Index (PMI), which combines manufacturing and services activity, rose to 54.2, its highest reading since May 2011.

Any reading above 50 indicates growth, while below 50 points to contraction.

Markit said the data pointed to second-quarter economic growth of 0.4%.

It comes despite concerns over the possibility of a messy Greek exit from the euro.

Speculation that Athens would miss a €1.6bn repayment to the International Monetary Fund (IMF) on Tuesday held back manufacturing activity in the month, Markit said.

But the European Central Bank’s (ECB) massive €1 trillion bond-buying programme announced in March was beginning to help the service sector, with activity running at its fastest rate since mid-2011.

Markit said the ECB stimulus programme – combined with low inflation – had boosted spending and investment across the eurozone, as consumers and businesses splurged their cash in an attempt to beat expected price rises.

“Despite the escalation of the Greek crisis in the second half of the month, the final PMI for June came in slightly above the ‘flash’ estimate, suggesting the turmoil has so far had little discernible impact on the real economy,” said Markit’s chief economist, Chris Williamson.

But he noted companies continued to cut prices to help boost sales, as they have since early 2012.

The composite price index was 49.4, below May’s reading of 49.5, suggesting prices are still falling and that the ECB’s battle with low inflation across the currency bloc has some way to go yet, despite official estimates suggesting a slight increase in inflation.

Price discounting helped drive up the PMI covering the service industry, which makes up the bulk of the eurozone economy. It rose to 54.4 from May’s 53.8.