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 today.
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 Markit.
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.
New orders across the euro zone 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," Mr Williamson said.
Inflation in the euro zone held at 2.7 percent last month, remaining firmly above the ECB's 2 per cent target ceiling, according to flash data released yesterday.
Reuters
