Euro zone growth stalls in June with sluggish services, manufacturing

LONDON (Reuters) -The euro zone economy flatlined for a second month in June, barely expanding as the bloc's dominant services industry showed only a small sign of improvement and manufacturing displayed none at all, a survey showed on Monday.

HCOB's preliminary composite euro zone Purchasing Managers' Index, compiled by S&P Global and seen as a good guide to growth, held steady this month at May's 50.2.

That was only just above the 50 mark separating growth from contraction and below expectations in a Reuters poll for 50.5.

"The euro zone economy is struggling to gain momentum. For six months now, growth has been minimal, with activity in the service sector stagnating and manufacturing output rising only moderately," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

"In Germany, there are signs of a cautious improvement in the situation, but France continues to drag its feet."

Overall demand fell for a thirteenth month, albeit only mildly, with the new business index rising to 49.7 from 49.0.

The services PMI nudged up to sit right on the break-even mark, up from May's final reading of 49.7, as the Reuters poll had predicted.

But optimism among services firms increased and the business expectations index bounced to a four-month high of 57.9 from 56.2.

The headline manufacturing index, which has been sub-50 since mid-2022, held steady at May's 49.4, defying expectations for a lift to 49.8. An index measuring output that feeds into the composite PMI fell to 51.0 from 51.5.

Factories reduced their selling prices for a second month. The output prices index remained at 49.2.

Euro zone inflation fell below the European Central Bank's 2% target in May and the central bank signalled a pause in policy easing after cutting its deposit rate for an eighth time this month.

One of the ECB's top policymakers, Bundesbank President Joachim Nagel, said last week that the bank will keep doing all that is necessary to complete its nearly accomplished mission on inflation.

(Reporting by Jonathan Cable; Editing by Toby Chopra)