Euro zone June business growth slow

Euro zone business activity picked up slightly last month but remained weak as a modest but broad-based upturn in the services industry offset a continued deep downturn in factory output, a survey showed.

Worryingly for policymakers at the European Central Bank, who are under pressure to support growth, forward-looking indicators did not point to a bounce back and business expectations for the year ahead dropped.

By the end of September, the ECB will either cut its deposit rate or ease its forward guidance further by pledging to keep interest rates lower for longer, according to a majority of economists in a Reuters poll.

The European Union’s nomination of IMF chief Christine Lagarde to replace Mario Draghi at the helm of the ECB has reinforced expectations for easier monetary policy going forward. Wednesday’s release of IHS Markit’s Euro Zone Composite Final Purchasing Managers’ Index (PMI), considered a good measure of overall economic health, will also do nothing to change those views.