Growth in the euro zone manufacturing sector hit a four-month low in March as domestic demand weakened and the euro's strength hurt exports, a survey of around 3,000 companies showed yesterday.

The Purchasing Managers' Index fell to 50.4 - below a consensus forecast of 51.5 - from 51.9 in February.

But it stayed above the key 50 level separating growth from contraction.

"This is a very weak reading. The fact that the orders component was very weak suggests that manufacturing activity will soften even further," said Lorenzo Codogno at Bank of America in London.

The new orders index for the 12-nation euro zone dropped to 50.4 from 52.8 the previous month, pointing to an easing in future output levels, while backlogs of work also fell to 49.0 from 51.4 in February.

The output index slipped to 51.6, with growth slowing to a 17-month low in France and a four-month low in Germany.

"There are a few key factors causing the slowdown, the first being the near stagnation of export orders growth and an easing in domestic demand both at the corporate and consumer level," said Chris Williamson, chief economist at NTC Research.

The fall in exports was largely attributed to the euro's strength and slowing global demand, Mr Williamson said, but euro-zone manufacturers also faced intense competition from cheaper imported goods from China.

"Everything in the survey suggests we're going to see rates of growth in the manufacturing sector ease in the coming months," Mr Williamson said. - (Reuters)