Euro zone factory growth remained tepid in May - PMI

By Jonathan Cable

Euro zone manufacturing activity growth remained lacklustre last month, a survey showed on Wednesday, supporting the view that strong economic growth in the first quarter did not carry through to the second.

Markit's final manufacturing Purchasing Managers' Index (PMI) for the euro zone dipped to a three-month low of 51.5 from April's 51.7, unchanged from an earlier flash reading.

"Manufacturing in the euro area remained stuck in a state of near-stagnation in May, failing to break out of the slow growth phase that has plagued producers since February," said Chris Williamson, chief economist at survey compiler Markit.

"The disappointing performance of manufacturing adds to suspicions that the pace of euro zone economic growth in the second quarter has cooled after a surprisingly brisk start to the year based on the latest estimate of GDP."

Gross domestic product grew 0.5 percent in the first quarter, figures showed last month, and is expected to expand just 0.3 percent this quarter, according to a May Reuters poll.

In the Markit survey a subindex measuring manufacturing output, which feeds into Friday's composite PMI, confirmed the preliminary estimate of a fall from April's 52.6 to 52.4. A reading above 50 indicates growth.

The slowdown came despite factories cutting their prices again. An index measuring output prices rose to 48.8 from 47.4, holding below the 50 mark for a ninth month.

Inflation across the currency union was -0.1 percent last month, official data on Tuesday showed, nowhere near the European Central Bank's 2 percent target ceiling.

But as the ECB fired another salvo in its battle to drive up growth and inflation earlier this year, introducing sweeping new easing measures, no action is expected when it meets on Thursday.