Euro Factory Growth Posts Five-month Low

The slowdown was most pronounced in the manufacturing sector, attributed to a drop in orders and supply chain disruptions caused by the earthquake and tsunami in Japan earlier this year.

Growth in the eurozone slowed in May according to a key indicator of eurozone manufacturing health released on June 3.

The eurozone manufacturing purchasing managers' index produced by researchers Markit fell from April's 58.0 to 55.8, slightly above an earlier estimate.

Although any score above 50 indicates growth, the slowdown in the rate produced a five-month low.

Researchers said growth slowed in all countries covered by the index despite 22 months of consecutive growth.

"This reinforces suspicion that the euro zone will not maintain a 0.8% GDP increase from one quarter to the next, achieved in the first quarter," said Howard Archer, analyst at IHS Global Insight.

The slowdown was most pronounced in the manufacturing sector, attributed to a drop in orders and supply chain disruptions caused by the earthquake and tsunami in Japan earlier this year.

Services were less affected. The final index of service activity in the euro zone reached 56.0 in May, a four-month low.

"The data betrays two-track growth," Markit said. "France and Germany lead the recovery, while Italy, Spain and Ireland are fast approaching zero growth."

"Weak growth in those three countries, synonymous with a drop in fiscal revenue and increase in social spending, will certainly threaten budget deficit reduction," said Chris Williamson, chief economist at Markit.

Copyright Agence France-Presse, 2011

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