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Euro zone business activity falls to 17-month low

If a U.K. vote on European Union membership wasn't enough to rattle nerves in Europe, the latest preliminary data on business activity in the single currency area showed that a slowdown in growth continued in June.

The flash purchasing manager's index (PMI) for the euro zone showed that business activity in the 19-country euro zone fell to 52.8 in June from a revised figure of 53.1 in May, according to Markit which publishes the monthly survey. The figure came in below a Reuters poll of analysts forecasting a reading of 53.0.

The PMI is a composite of services and manufacturing activity in the region and the 50-point mark separates expansion from contraction. The survey is a closely-watched indicator of the health of the euro zone's private sector economy.

Breaking down the figures, the euro zone's largest economy Germany posted a composite figure of 54.1 for June, down from 54.5 in May. Meanwhile, France posted a composite PMI of 49.4 in June, slipping into contraction territory having fallen from 50.9 in May.

Last month, the composite PMI fell to a 16-month low and failed to meet expectations. The data will be concerning for the European Central Bank which has employed various tools, including rate cuts and asset purchases, in a bid to boost growth, business activity and inflation in the region.

Chris Williamson, chief economist at Markit, said in the latest PMI report that June's survey data pointed "to steady though disappointingly lackluster economic growth."

"Rising political uncertainty appears to have caused the pace of expansion to weaken slightly and business confidence about the outlook to deteriorate. The second quarter is therefore likely to see economic growth slacken from the solid 0.6 percent expansion seen in the opening quarter of the year to around 0.3 percent," he said.

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