Euro zone economy hits 'speed bump' in February on rising prices: PMI

The euro zone's economic boom paused last month as rising prices took a toll on demand, but the zone remains on course for its best growth in eight years, a survey showed on Monday.

Growth was robust and broad, with countries across the region reporting expansion, welcome news to the European Central Bank as it looks to end its ultra-easy monetary policy.

HIS Markit's Final Composite Purchasing Managers' Index, seen as a good overall indicator of growth for the euro zone, fell to 57.1 in February from January's 58.8 and down from the flash estimate of 57.5.

January's reading was a level not seen since June 2006. But the slight slip last month leaves the PMI well above the 50 mark that separates growth from contraction.

"The euro zone economy looks to have hit a speed bump in February after a stellar start to the year. It's too early to read too much into the February fall in the PMI, and some pull-back from January's high was always on the cards," said Chris Williamson, chief business economist at HIS Markit.

Higher consumer spending and investment underpin euro zone strong growth

The euro zone economy grew at a robust pace in the three months to June, driven mostly by higher domestic demand and investment, official data released on Thursday confirmed.

The European statistics office Eurostat said the euro zone's expansion picked up speed in the second quarter, with the economy growing 0.6 percent compared with the previous three months. That was in line with previous estimates and market expectations and up from a 0.5 percent rise in January-March.

The acceleration was driven by growing consumer spending and investment, with the economy shrugging off slower export growth as a result of the strong euro.

Household consumption went up by 0.5 percent in the second quarter from 0.4 percent in the first three months of the year, and imports more than doubled their growth rate to 0.9 percent from 0.4 percent.

Government expenditure also accelerated to 0.5 percent from 0.2 percent.

Higher consumer confidence and demand drove up investment, which expanded by 0.9 percent after a 0.3 percent contraction in the previous quarter.
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Euro zone's June quarter deficit at decade low, Germany widens surplus

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The euro zonE public deficit dropped in the first quarter of the year to its lowest level in nearly a decade, driven by a widening surplus in Germany and despite France's increasing fiscal gap, data released on Thursday showed.

The figures, published by the European Union's statistics office Eurostat, confirmed the improving state of the bloc's public finances, although public debt increased in the first quarter driven by a further expansion of Italy's debt, the second largest in the 19-country currency bloc.

Eurostat said that government deficit in the euro zone dropped to 0.9 per cent of output in the first quarter of the year from 1.1 per cent in the previous quarter, confirming a long-lasting downward trend.

It was the lowest level of public deficit since the last quarter of 2007, when the global financial crisis began hitting euro zone's economies forcing higher public spending to prop up the financial sector.

The fall in the bloc's fiscal gap was helped by Germany's thrift, as the bloc's largest economy further expanded its surplus to 1.5 percent of output in the first quarter from 1.4 percent in the last quarter of 2016, and 0.7 percent in the third quarter of last year.

The widening of the surplus goes against calls on Germany from other euro zone countries and European Union institutions to increase spending and rise wages to help strengthen the bloc's recovery.
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