Manufacturing slowdown adds to pressure on ECB for stimulus
A Purchasing Managers’ Index fell to 52.2 last month from 53.4, below a May 22 preliminary reading of 52.5, London-based Markit Economics said yesterday.
The index has held above the 50 mark, which separates growth from contraction, for 11 months.
Growth in new orders eased, according to the report.
The recovery in the 18-nation region is struggling to gather pace amid sluggish bank lending and annual price gains of less than half the ECB’s goal. Policymakers meeting in Frankfurt on Thursday have said that they are prepared to present a package of stimulus measures if new forecasts show growth and inflation will stay too low for too long.
The survey “will inevitably add to the clamour for policy makers to provide a renewed, substantial boost to the region’s economy and ward off the threat of deflation,” said Chris Williamson, chief economist at Markit in London.
“However, the case is not so clearcut.”
While French manufacturing contracted for the first time in three months, the survey “highlights some encouragingly strong” performances in countries such as Spain and Italy, Williamson said.
In Spain, the index rose to 52.9 in May from 52.7, the strongest level since April 2010, and remained close to the highest in more than three years in Italy.
In the euro area, selling prices increased for the first time in three months, according to the report.
The PMI surveys suggest the region’s economy is on track for growth of 0.5% this quarter, Markit said.
Gross domestic product increased 0.2% in the first three months of the year.
Still, 90% of economists in the Bloomberg Monthly Survey predict the ECB will reduce interest rates this week.
Most forecast a cut in both the benchmark rate, now at 0.25%, and the deposit rate, which is at zero.
New liquidity operations and asset purchases are also among measures policymakers are considering.
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