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Euro zone PMI at 6-month low

Source: Reuters - Wed 1st Sep 2010

Manufacturing activity in the euro zone expanded in August at its slowest pace since February as the pace of recovery among member countries diverged further, a survey showed on Wednesday.

The Markit Eurozone Manufacturing Purchasing Managers' Index for August dropped to 55.1 from 56.7 in July but was nudged up from an earlier flash estimate of 55.0 and marked its 11th month above the 50.0 mark that divides growth from contraction.

The output index slid to 57.1 last month from 58.7 in July and was revised down from a flash reading of 57.2.

"The euro zone manufacturing PMI suggests that the expected cooling of the sector from the buoyant growth rates seen earlier in the year is underway," said Rob Dobson at data provider Markit.

"Expansion of output and new orders both slowed noticeably in August although, on current form, manufacturing should provide a solid contribution to third-quarter GDP."

The euro zone economy escaped from its worst post-war recession in the third quarter of last year and preliminary data showed the economy grew a faster-than-expected 1.0 percent between April and June.

But growth is seen slowing to 0.4 percent in the current quarter and then to 0.3 percent in the following three quarters.

Services PMIs due on Friday are expected to confirm that the bloc's dominant service sector also saw a slower expansion in August.


Purchasing managers' surveys released earlier on Wednesday showed manufacturing growth in Germany, Europe's biggest economy, slowed in August whereas business in France accelerated. Italy and Spain saw their manufacturing indexes slip backwards, widening the gap among the euro zone's big four economies.

"Drilling down into the national data highlights just how uneven the recovery remains. August saw France, Germany and Austria stay well ahead of a subdued chasing pack including Spain and Italy, while Greece remained firmly in the grips of a deep downturn" Dobson said.

As factories struggle to maintain growth they have found it harder to raise prices.

The euro zone's input and output price indexes both fell in August from July, with the latter falling to 52.2 from 52.7 the month before - its lowest reading since March.

Data released on Tuesday showed euro zone inflation slowed as expected in August to 1.6 percent year-on-year but unemployment held steady at a near 12-year high of 10 percent. The PMI employment index held steady just above the break even mark.

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