Eurozone Manufacturing Activity Weakens Unexpectedly In May

Weaker output and slower flow of new orders.

Manufacturing activity in the 13 nations that share the euro eased to a 15-month low point in May despite expectations of a slight improvement, according to a widely watched survey on June 1.

The eurozone's seasonally adjusted purchasing managers' index (PMI), compiled by NTC Research, fell in May to 55.0 points from 55.4 in April, falling short of private economists' expectations for 55.6 points.

Despite the lower level of activity, the sector kept showing resilience with the twenty-third consecutive month of growth, as indicated by a figure over 50.

Economists said that the weakness showed that the strength of the euro, rising borrowing costs and dipping demand from abroad were beginning to take its toll on manufacturers. Global Insight economist Howard Archer said that "the sector continues to gradually lose momentum from the peak levels seen last summer, indicating that the strong euro, higher interest rates and a limited easing in global growth are having some dampening impact on activity."

In a breakdown of the survey's findings, eurozone factory managers reported both weaker output and a slower flow of new orders, especially from abroad. At the same time, they kept taking on more workers to help deal with the backlog of past orders as growth in employment levels steadied at a six-and-a-half-year high.

Copyright Agence France-Presse, 2007

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