Euro-Area Growth Slowing as Orders Drop

Assembled cars in a row at car plantAssembled cars in a row at car plant

The euro area’s purchasing managers index shows private-sector of the region is still struggling with growth as expansion unexpectedly slowdown in May.

Purchasing Managers Index slipped to 52.9 from 53 recorded in April, Falling below 53.2 predicted by economists, said London based Markit Economics on Monday. Also gauge of services activity held at 53.1, while manufacturing fell from 52.6 to 52.4.

The euro-area economy grew 0.5 percent in the first quarter of the year, making it its fastest growing quarter in a year. But with inflation still below target even with several rate cuts and expansions of asset-purchase programs to stimulate the economy, the European Central Bank is running out of options and has since become more vocal in urging governments to do their part in underpinning growth.

“The robust pace of economic growth seen in the first quarter will prove temporary,” said Chris Williamson, chief economist at Markit. “The survey therefore paints a picture of a region stuck in a low-growth phase, managing to eke out frustratingly modest output and employment gains despite various ECB stimulus ‘bazookas,’ a competitive exchange rate and households benefiting from falling prices.”

According to the report, new orders grew at the weakest pace since January 2015, indicating potential dropped in production growth next month. Average selling price plunged, while employment rose for the 19th straight month.

The PMIs for France and German points to accelerating private-sector growth, expansions elsewhere in the region cooled, Markit said.

The remaining data for May is expected to be published on June 1.

 

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years' experience as a foreign exchange research analyst and trader. A graduate of University of East London, U.K. and a vivid financial markets analyst.

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