Growth in euro zone business activity slowed in June, with manufacturing suffering its biggest drop in six months, according to a survey released on Friday.
The euro zone's Purchasing Managers' Index (PMI), compiled by Hamburg Merchant Bank and published by S&P Global, fell to 50.8 points from 52.2 points in May, the lowest level in three months.
A PMI above 50 indicates growth, while a reading below 50 means contraction, AFP reported.
Manufacturing activity fell to 46 points in June from 49.3 in the previous month.
Nonetheless, the data “points to continued GDP growth in the second quarter,” S&P said. But the decline in the PMI suggests growth “may be slower than initially expected,” said Bert Collin, chief euro zone economist at ING Bank.
Economists said the European Central Bank was unlikely to cut interest rates again in July, although further cuts were expected later this year.
“The PMI does not encourage the ECB to cut interest rates in July,” said Cyrus de la Rubia, chief economist at Hamburg Merkbank.
As the euro zone's second-largest economy, France has a major influence on the euro zone's economic performance, according to de la Rubia.
“France's weak economic performance is clearly contributing to the worsening economic situation in the euro area,” de la Rubia said.
The survey found declines in both the services and manufacturing sectors.
Dellarrubia suggested this may have something to do with President Emmanuel Macron's party's defeat by the far right in European elections this month and his call for early general elections for June 30.
“This unexpected turn of events has likely caused great uncertainty about future economic policies and led many companies to postpone investments and new orders,” de la Rubia added.
However, Franziska Palmas, chief European economist at Capital Economics, warned against “over-interpreting” these developments, noting that “France's PMI began to fall in May, before the political upheaval.”
In contrast, Germany, the euro zone's largest economy, recorded a third consecutive month of increased business activity, according to the survey.
