Eurozone Economy Holds Up

Eurozone Economy Holds Up

LONDON (AP) -- The recovery across the 19-country eurozone economy appears to have firmed in June despite escalating fears over a Greek debt default and exit from the euro, a closely watched survey found Tuesday.

Financial information company Markit said its purchasing managers index for the eurozone — a broad gauge of business activity — rose to a 49-month high of 54.1 points in June from the previous month's 53.6. Anything above 50 indicates expansion.

It said growth picked up in both services and manufacturing and that the recovery is increasingly broad-based across countries. The June advance isn't just due to Germany, Europe's biggest economy. France — "the latecomer to the recovery," according to Markit — has just enjoyed its best quarter for four years.

Markit said the June upturn took the second-quarter average for the eurozone to its highest level for four years and points to quarterly economic growth of 0.4 percent and annual growth of 2 percent.

"Despite the cloud of the Greek debt crisis hanging over the region, the eurozone saw economic growth accelerate to a four-year high in June," said Markit chief economist Chris Williamson. "The eurozone economy is weathering the Greek storm relatively well."

Following a summit of eurozone leaders Monday, hopes are high that a deal with Greece will emerge in the coming days to prevent a default. A deal could provide a further fillip to growth in the coming months, though it is unlikely to get the Greek economy out of its recession anytime soon.

A confluence of factors appears to have helped the eurozone cope with the uncertainty surrounding Greece. The near 50 percent fall in oil prices since last summer seems to have boosted consumer spending by acting like a tax cut, while the fall in the euro to near decade-lows against the dollar has been a boon for exporters. And the European Central Bank's stimulus, which involves the purchase of around 1.1 trillion euros ($1.2 trillion) of bonds, has helped keep a lid on borrowing rates.

James Howat, European economist at Capital Economics, said the recovery could weaken in the coming quarters as these tailwinds fade.

"And given that Greece's membership of the euro remains precarious, a messy exit might yet damage the eurozone recovery," he said.