Europe’s vast service industry expanded faster than initially thought last month, surveys showed on Friday, speeding ahead despite warning signs that Greece might crash out of the euro zone.
Firms across the currency union enjoyed a better June than predicted by a preliminary reading, growing at a four-year record pace, while British firms ramped up activity more than anyone in a Reuters poll had forecast.
“While the economic situation is actually progressing and seems to be fairly stable you can’t help thinking that there could be a significant reversal in the months ahead if things start to unravel,” said Stephen Webster at 4CAST.
“People are trying to look through the Greek situation and put a positive spin on things but there are massive uncertainties out there. You have to treat the survey data with a bit of suspicion.”
It has been an eventful week for Greece: it closed its banks, introduced capital controls and became the first developed country to default on an International Monetary Fund loan.
Negotiations with creditors over a reforms-for-cash deal are at a standstill and a referendum on Sunday whose result looks too close to call could determine the country’s future in Europe.
Concerns over the €1.6 billion repayment to the IMF that Athens missed on Tuesday heightened fears Greece would be forced to abandon the euro and kept euro zone manufacturing activity in check last month.
But the final composite PMI for June, which combines manufacturing and services activity and is seen as a good measure of growth, came in at 54.2, just above a preliminary 54.1 and well ahead of May’s 53.6.
That was its highest reading since May 2011 and the index has now been above the 50 mark that separates growth from contraction for two years.
Suggesting low inflation and the European Central Bank’s €1 trillion bond-buying programme were boosting spending among consumers and businesses, the bloc’s dominant service sector ramped up activity at the fastest rate since mid-2011.
Retail sales also benefited in May, rising faster than thought.
But markets were little moved after Friday’s data as they instead wait for the referendum outcome.
Reuters
