Growth in the Eurozone at 20-month low

23 June 2011

23 June 2011 | Adam Leach

A sharp slowdown in manufacturing in the Eurozone has led to the lowest rate of growth since October 2009, according to purchasing managers.

The Markit Flash Eurozone Purchasing Managers’ Output Index (PMI), based on data from 13-22 June, dropped to 52.4 for June compared with 55.2 in May.

Output growth has slowed sharply since peaking in February. This was a result of the first drop in new orders since July 2009 and only a modest rise in export orders.

The PMI survey also saw the ratio of new orders to inventories in the manufacturing sector drop to its lowest since April 2009. The German manufacturing sector grew slightly in June but slowed down sharply from the pace seen in the first quarter, with growth slightly increasing from May. Meanwhile France saw growth in the sector hit an eight-month low.

On a more positive note for manufacturers, the report found that input prices had increased at the slowest rate since October 2010, down from the peak rate in March.

Chris Williamson, chief economist at Markit said: “The euro area’s economic growth surge has lost momentum at a worrying rate in the past two months. Manufacturing growth has slowed especially sharply, slipping close to stagnation in June.

“Even German manufacturing, the driving force of the region’s recovery, has seen a marked deterioration in output and new orders growth – linked to a large extent to a severe weakening of export order book growth. Meanwhile, the euro area excluding France and Germany has fallen back into contraction for the first time since late 2009.

“Although prices charged for goods and services rose at an increased rate, input cost inflation slowed sharply, largely reflecting lower oil and other commodity prices. Lower costs should feed through to lower selling prices, and ultimately consumer price inflation, in the coming months.”

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