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Eurozone manufacturing growth slows but prices rise

Eurozone manufacturing growth eased in April but factories raised prices for the first time in eight months, according to a survey that also showed headcount rose at the fastest pace in nearly four years.

Any signs of inflationary pressure will be welcomed by the European Central Bank, particularly as it only had a marginal impact on growth. Markit’s final April manufacturing Purchasing Manager’s Index (PMI) stood at 52.0, revised up from a flash reading of 51.9 but shy of March’s 10-month high of 52.2.

It was the 22nd month it has been above the 50 mark that separates growth from contraction. An index measuring output, which feeds into the Composite PMI due tomorrow, came in at 53.4, compared with March’s 10-month high of 53.6.

“The dip in the rate of expansion will serve to check recent optimism that the ECB’s quantitative easing programme has bought a guaranteed ticket to recovery,” said Chris Williamson, Markit’s chief economist.

To restore economic growth and combat deflation, the ECB started buying around €60bn a month of mostly government bonds in March. Recent data have implied that the programme has already paid dividends.

Official figures last week showed the eurozone ended four months of deflation in March with consumer prices unchanged from year-ago levels. The survey’s output price index nudged above 50 for the first time in eight months, suggesting inflation may turn positive.

In further indicators of optimism, the employment sub-index rose to 51.9 from 51.6, its highest since August 2011. Unemployment held steady at 11.3% in March, official data showed last week.

Meanwhile, a separate survey yesterday showed that sentiment in the eurozone weakened slightly in May but analysts and investors were more upbeat about the current situation than at any point since mid-2011, suggesting they are generally brushing off the Greek crisis.

Sentix research group’s index tracking morale among investors and analysts in the eurozone slipped to 19.6 in May from 20.0 in April.

Article Source: http://tinyurl.com/kbwqb42


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