Tags: Eurozone | Factory | Growth | Slows | Orders

Eurozone Factory Growth Slows as Orders Dry Up

Friday, 01 Jul 2011 01:17 PM

Growth in the euro zone's manufacturing sector lost steam last month as exports slowed to a trickle and domestic demand all but dried up, while the region's weaker economies appear to be slipping back into recession, a key survey showed on Friday.

The Markit Eurozone Manufacturing Purchasing Managers' Index fell to 52.0 last month from 54.6 in May, its lowest reading since December 2009, in line with an earlier flash estimate and marking the 21st month above the 50 break-even level.

Output in the sector, which drove a large part of the economic recovery, slumped to a 21-month low, with the index falling to 52.5 from May's 55.2. The June reading was revised up slightly from a 52.4 flash reading.

More worryingly for policymakers, the data again highlighted a two-speed economy, with a more resilient Germany and France propping up a struggling periphery.

"Increasing numbers of countries are showing signs of sliding back into recession, with deteriorating business conditions now reported in Italy, Spain, Ireland and Greece," said Chris Williamson at data provider Markit.

The Greek parliament passed a second austerity bill on Thursday to enable the country to avert bankruptcy by securing a 12 billion euro loan tranche from the European Union and International Monetary Fund.

Greece, along with Ireland and Portugal, still faces years of economic purgatory after being forced to go cap in hand for bailouts from the EU and IMF to stave off defaulting on their debts.

Earlier data from Italy showed its manufacturing sector shrank for the first time in 20 months while Spain's contracted for the second month running.

Growth in the German and French sector's slowed considerably.

Price Pressures Ease

New orders across the 16-nation bloc fell for the first time in nearly two years, with the index falling below the 50 mark, while the new export order index echoed the previous month's rapid fall as the global economic recovery showed signs of stalling.

One bright spot for policymakers was a sharp fall in the input price index to 62.5 from the previous month's 69.4.

"Although companies continued to hike prices in response to rising costs, the rate of input price inflation slowed to the weakest since August 2010 due to lower prices for oil and other commodities," Williamson said.

Inflation in the bloc held at 2.7 percent last month, remaining firmly above the ECB's 2 percent target ceiling, according to flash data released on Thursday.

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Growth in the euro zone's manufacturing sector lost steam last month as exports slowed to a trickle and domestic demand all but dried up, while the region's weaker economies appear to be slipping back into recession, a key survey showed on Friday. The Markit Eurozone...
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2011-17-01
 

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