Eurozone Growth Seen Easing Slightly in Third Quarter -- Update

The eurozone economy appears to be slowing slightly, although it remains on course for its strongest year since 2010, business surveys indicate.

The currency area has been one of the positive surprises for the global economy this year, as it outpaced the U.S. in the first quarter and accelerated further in the three months to June.

However, an early indicator of activity points to a modest easing of growth in the third quarter, which ends this month.

Data firm IHS Markit on Tuesday said its composite Purchasing Managers Index for the eurozone was unchanged at 55.7 in August. That was below the preliminary estimate of 55.8, and the average reading for the second quarter. A reading above 50.0 signals an increase in activity, while a reading below signals a decline.

The measure is based on a survey of 5,000 businesses across the eurozone, and is followed closely by policy makers at the European Central Bank.

"The summer months have seen eurozone economic growth moderate only slightly from the rapid pace seen in the spring," said Chris Williamson, IHS Markit's chief business economist.

Figures on retail sales for July also released Tuesday by the European Union's statistics office also point to a moderation of growth. Sales were down 0.3% from June, having risen in each month since the start of the year.

However, Mr. Williamson said the PMI suggests the eurozone economy is on course for a 2.1% expansion in 2017 as a whole, which would be its best performance since 2010, when it recorded the same rate of growth. The eurozone economy last grew at a faster pace than that in 2007, as the global financial crisis loomed.

Some analysts expect the ECB's economists to raise their growth forecasts for the year Thursday, having already increased their projections twice this year. They currently expect to see growth of 1.9% this year.

The eurozone's growth acceleration has fueled expectations the ECB will start to wind down its purchases of government bonds from January, with some analysts anticipating an announcement to that effect when policy makers conclude their latest meeting Thursday, although most see the Oct. 26 meeting as a more likely occasion.

However, there are few signs the pickup in growth has transformed the outlook for inflation, which is well below the ECB's target of just under 2%.

Write to Paul Hannon at paul.hannon@wsj.com

(END) Dow Jones Newswires

September 05, 2017 05:40 ET (09:40 GMT)