Euro zone manufacturing growth eases in June, France slowdown weighs: PMI

[July 01, 2014]  By Jonathan Cable

LONDON (Reuters) - Euro zone manufacturing growth eased slightly more than previously thought last month and factories fulfilled existing orders to keep busy, a business survey showed on Tuesday.

A resurgence in the bloc's periphery countries supported Germany, which was again the driving force, despite slower growth due to extra public holidays. But in France - the bloc's second-biggest economy - the contraction in activity deepened.

Markit's final Manufacturing Purchasing Managers' Index (PMI) for the euro zone fell to 51.8 in June from May's 52.2, its lowest since November.

The final figure was just below a preliminary flash reading of 51.9 but has now held above the 50 mark that separates growth from contraction for a full year. A subindex measuring output fell to 52.8 from 54.3, marking a nine-month low.

Some of that tepid growth was generated by running down existing orders as new business increased at a slower pace than in May. The backlogs of work index fell to a nine-month low of 49.5 from 49.6.
 

"The PMI survey will raise concerns that the euro zone recovery is losing momentum. The overall picture is a reminder of just how fragile the region's recovery is looking," said Chris Williamson, chief economist at data collator Markit.

Having expanded a feeble 0.2 percent in the first three months of 2014, euro zone quarter-on-quarter growth is expected to be just 0.3-0.4 percent through to the end of next year. EUGDPQ

"The slowdown will put pressure on policymakers at the ECB to do more to prevent the recovery from stalling, and we will no doubt see more calls for full-scale quantitative easing to be implemented," Williamson said.

The chance of the European Central Bank launching an asset purchase program has risen to one-in-three, a Reuters poll taken last week found, ahead of this Thursday's ECB policy-setting meeting.

ECB President Mario Draghi announced a raft of measures last month to counter the threat of deflation and support growth, including cutting the deposit rate below zero and offering more long-term loans aimed at boosting bank lending to businesses.

Inflation held steady at just 0.5 percent last month, well below the ECB's target of just below 2 percent and firmly in what it calls the "danger zone".

The PMI data showed factories raised prices marginally in June for a second month but not as fast as their input costs rose.

(This refiled version of the story fixes dropped letter in the lead)

(Editing by Hugh Lawson)

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