UPDATE 1-Euro zone factory PMI sinks, output growth slows

* Manufacturing PMI revised down vs flash; output revised up

* Output index falls at 2nd fastest pace in 13-year history

* Factory input prices highest since July 2008

(Adds market reaction, analyst comment)

By Jonathan Cable

LONDON, June 1 (BestGrowthStock) – Manufacturing in the euro zone
expanded in May, but at a far slower rate than April’s 46-month
high as cost pressures and tighter margins drove firms to take
their feet off the production accelerator, a survey showed on
Tuesday.

The 16-nation bloc and its common currency have been hit by
waves of investor insecurity churned up by the region’s debt
crisis and fears that troubles in Greece may be spreading to
other peripheral euro zone economies.

“There has been a slowdown in growth globally and in the
euro zone there is subdued domestic demand due to the austerity
measure implemented in some countries,” said Luigi Speranza at
BNP Paribas.

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For a graphic see: http://r.reuters.com/quj57k

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The Markit Eurozone Manufacturing Purchasing Managers’ Index
for May sank to 55.8 from 57.6 in April, nudged down from an
earlier flash estimate of 55.9.

This is its eighth month above the 50.0 mark that divides
growth from contraction, but markets were unmoved by the data.

Cost pressures were on the rise, with the price of
factories’ raw materials forced up by the weaker euro.

The output index recorded its second fastest slide in the
survey’s history — only surpassed in the aftermath of
Lehman Brothers’ collapse — to stand well shy of April’s near
10-year high of 61.2 at 56.8. It inched up from a flash reading
of 56.7.

“Importantly, however, the pace of growth remained robust,
and the slowdown in May no doubt reflects a payback from April’s
ultra-strong growth to some extent,” said Chris Williamson at
data provider Markit.

In Germany, the bloc’s biggest economy, manufacturing
activity slowed from the previous month’s survey’s record high.
Neighbouring France, the second biggest, saw growth in its
sector slow from April’s near 4-year high.

Spain and Italy also saw a dip in their main indexes. A
separate survey on the UK showed manufacturing activity holding
on to its strongest pace in 15 years.

Euro zone manufacturers were hit by rising input prices,
with that index reaching its highest level since July 2008 at
73.7 last month, compared to 73.4 in April.

The euro has been battered in recent weeks, driving up costs
of materials from outside the bloc, on fears that Greece’s debt
problems will spread and in spite of a $1 trillion safety net
set up by European policymakers earlier this month.

However, the output price index fell from last month,
suggesting producers had more trouble passing on price rises to
customers.

Flash data released on Monday showed prices in the bloc rose
1.6 percent in May, faster than the 1.5 percent seen in April.

Detailed PMI data are only available under licence from
Markit and customers need to apply to Markit for a licence.

To subscribe to the full data, click on the link below:
http://www.markit.com/information/register/reuters-pmi-subscriptions

For further information, please phone Markit on +44 20 7260
2454 or email [email protected]

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(Editing by Toby Chopra, John Stonestreet)

UPDATE 1-Euro zone factory PMI sinks, output growth slows