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Euro zone services heats up in June

Friday, July 03, 2015 - 02:03

Euro zone business activity expanded at its fastest pace in four years last month as the European Central Bank's stimulus package more than offsets fears Greece could crash out of the currency union. Sonia Legg reports.

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The heat is intense in parts of Spain and even the economy is showing signs of sizzling - relatively speaking anyway. The government is predicting growth of 3.3 percent this year. And new figures for the service sector are also encouraging. Job creation in June grew at its fastest rate in almost eight years. And Markit's Purchasing Manager's Index of service companies was 56.1 - the 20th straight month above the key growth figure of 50. But Jane Foley from Rabobank says it's come at a price. (SOUNDBITE) (English): JANE FOLEY, SENIOR FX STRATEGIST, RABOBANK, SAYING: "Spain has made leaps and bounds in terms of its competitiveness that's certainly there within the data but you have to look at how they have done this and of course many workers - like others in Ireland for Portugal - many workers have taken wage cuts - Greece too of course and that doesn't help the individual workers." The wages cuts mean less disposable income and pressure on inflation. And with elections later this year Greece's fate is also crucial. Like the recent heat support is rising for the left-wing Podemos party which aligns itself with Greece's ruling Syriza party. The current government hopes a better economy will help them fight off the challenge. (SOUNDBITE) (English): JANE FOLEY, SENIOR FX STRATEGIST, RABOBANK, SAYING: "I think if the government in Greece were to fall that might be quite celebrated within the government in Spain." Elsewhere in the euro zone it was a similar sunny story. Italy's service sector expanded in June at its fastest rate in 12 months, improving the country's chances of a second quarter of recovery after three years of recession. Germany's private sector caught a wave with growth improving in both factories and service providers. And even struggling France saw encouraging a bit of warmth. Economic activity in the private sector expanded for a fifth month running as services continued to grow and manufacturers finally shock off recession. Across the whole of the euro zone business activity expanded at its fastest pace in four years. The central bank's bond buying programme more than offsetting fears over Greece.

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Euro zone services heats up in June

Friday, July 03, 2015 - 02:03