Bloomberg News

Euro-Area Manufacturing Contracted for 10th Month in May

June 01, 2012

Euro-area manufacturing contracted for a 10th month in May as the economy struggled to regain strength amid the deepening debt crisis.

A gauge of manufacturing in the 17-nation euro area fell to 45.1 from 45.9 in April, London-based Markit Economics said today. That’s the lowest since mid-2009. It had previously reported the May output indicator at 45. A reading below 50 indicates contraction.

European companies are curbing spending and hiring with the worsening fiscal crisis clouding the economic outlook. Euro-area economic confidence fell more than economists had forecast last month, with a gauge of sentiment among manufacturers dropping to the lowest in more than two years. Unemployment was at a record of 11 percent in April, data showed today.

Today’s PMI report “is hugely disappointing and reinforces belief that the euro zone is headed for renewed, clear contraction in the second quarter,” said Howard Archer, chief European economist at IHS Global Insight in London. “Manufacturers are currently finding life difficult.”

The euro fell against the dollar for a fourth day, trading at $1.2318 at 11:03 a.m. in Brussels, down 0.4 percent.

European Contraction

The single currency has slumped close to a two-year low this week as investors grew more concerned about the debt crisis after inconclusive elections in Greece raised the specter of a breakup. In Spain, Prime Minister Mariano Rajoy signaled the nation’s debt sustainability may be in danger as borrowing costs edged closer to the 7 percent level that forced Greece, Portugal and Ireland to seek external aid.

The European Commission said last month that the euro-area economy may shrink (EUGNEMUQ:US) 0.3 percent this year, with countries from Spain to the Netherlands in recession. In Germany, Europe’s largest economy, gross domestic product may rise 0.7 percent, the Brussels-based commission projected.

U.K. manufacturing contracted last month at the fastest pace since the depths of the financial crisis in 2009. A gauge of factory output dropped to 45.9 from 50.2 in April, Markit said.

China, Japan

In China, manufacturing grew at the weakest pace since December, with the purchasing managers’ index falling to 50.4 in May from 53.3 in the previous month, China’s statistics bureau and logistics federation said in Beijing today. A separate gauge from HSBC Holdings Plc and Markit showed a seventh straight contraction.

Elsewhere in the Asia-Pacific region, South Korea’s exports declined for a third month in May, falling a less-than-forecast 0.4 percent from a year earlier.

The European Central Bank will release its latest economic projections for this year and next when council members meet in Frankfurt on June 6.

To contact the reporter on this story: Simone Meier in Zurich at smeier@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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