Eurozone Manufacturing Sector Falls More than Expected as France Struggles

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Eurozone Manufacturing Sector Falls More than Expected as France StrugglesEuro area manufacturing declined more than forecasted in May as France’s manufacturing shrank, in what is a pointer to the region’s unbalanced economic recovery. This piles more pressure on the European Central Bank to boost stimulus to speed up growth and combat low inflation.

Financial research firm Markit Economics reported that its eurozone Purchasing Managers’ Index plunged to 52.2 in May from 53.4 in April. However, the reading trailed the May 22 early estimate of 52.5. Nonetheless, the measure stood above 50 point; which divides growth and contraction for the 11th straight month.

The report also showed that new factory orders declined. The French manufacturing sector also declined for the first time in 3 months, though nations such as Italy and Spain reported encouraging results. In Spain, the measure grew to 52.9 last month from 52.7, its strongest mark since April 2010. In Italy, the index also neared the highest level in over three years.

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Selling prices in euro area also surged for the first time in three months, showed the report, which also forecasts the bloc’s economy to grow by 0.5 percent in 2014. The gross domestic product expanded by 0.2 percent in the first quarter.

“The survey will inevitably add to the clamor for policy makers to provide a renewed, substantial boost to the region’s economy and ward off the threat of deflation,” Chris Williamson, a London-based chief economist at Markit told Bloomberg. “However, the case is not so clear-cut.”

The economic resurgence of the eurozone is currently facing various hurdles such as low inflation and weak bank lending. This prompted policy makers to say that they may roll out various stimulus measures if inflation and growth remains weak for some time. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com