Eurozone businesses shrug off Greek fears; growth reaches four-year high

Eurozone business activity expanded at its fastest pace in four years last month as the European Central Bank's stimulus package more than offset fears Greece could crash out of the currency union, surveys showed. Speculation that Athens would miss a 1.6 billion-euro repayment to the International Monetary Fund on Tuesday heightened expectations Greece would have to abandon the euro, keeping manufacturing activity in check last month.
But the service industry shrugged off those fears and ramped up activity at the fastest rate since mid-2011, suggesting low inflation and the ECB's trillion-euro bond-buying programme was boosting spending among consumers and businesses. The final composite PMI for June, which combines manufacturing and services activity and is seen as a good guide to growth, came in at 54.2, just above a preliminary reading of 54.1 and well ahead of May's 53.6.
That was its highest reading since May 2011. The index has now been above the 50 mark that separates growth from contraction for two years. "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 Chris Williamson, Markit's chief economist. However, as they have since early 2012, companies cut prices to drum up trade. The composite output price index was 49.4, below the May and flash readings of 49.5.
Price discounting helped drive up the PMI covering the service industry, which makes up the bulk of the euro zone economy. It rose to 54.4 from May's 53.8, matching the preliminary estimate. To meet the demand, services took on staff at the second fastest rate since mid-2011. The employment sub-index was 52.2, below the previous month's 52.6. Markit said the data pointed to second-quarter economic growth of 0.4 percent, in line with a Reuters poll taken last month. Detailed PMI data are only available under licence from Markit and customers need to apply to Markit for a licence.