LONDON, July 3 - The pace of contraction in the euro zone's service sector slowed in June for the second month running as optimism grew and demand picked up, a survey of more than 2,000 companies showed on Thursday. The euro zone business activity index, which covers service companies ranging from airlines to banks and hotels, was up at 48.2 in June from 47.9 in May, still below the 50 line that divides shrinkage from growth and below the 48.5 consensus.
Latest comment -- ELWIN DE GROOT, FORTIS BANK, AMSTERDAM "Overall the impression is still that the economy has remained very weak in June...but there is a silver lining in this report and that's the German PMI for the services sector, because that rose quite sharply... "It's too early to talk about a real turnaround but what the report is underlining, especially for Germany, is that the sharp rise in the euro...is affecting the export sector...but the service sector is less affected by this. There we see some signs of a slow turnaround...Other surveys such as the Ifo show the retail sector is improving, so what we're looking at is some recovery in domestic demand and consumer spending. That makes me moderately optimistic."
Earlier comment --
MIKE TAYLOR, MERRILL LYNCH, LONDON "It suggests still weak domestic activity in the euro zone, but there does seem to be a slight improvement. However, it's not really the post-war recovery hoped for in the euro zone. Combined with the manufacturing surveys earlier this week, it suggests stagnant growth in the euro zone in the second quarter. It adds to the very large stock of evidence of weak economic activity in the euro zone. Our view is the ECB will cut again in September."
GUILLAUME MENUET, 4CAST, LONDON
"It's all fairly disappointing. After the manufacturing decline, we thought that business activity would rebound slightly more than it did...We think it's further evidence that the recovery is being delayed, and as such continues to leave the door open for additional ECB easing this year."//