Euro region manufacturing slumps

Euro region manufacturing shrank for a ninth month in April, adding to signs an economic slump in the region is getting worse.

A factory gauge based on a survey of purchasing managers slipped to 45.9 from 47.7 in March, London-based Markit Economics said today.

That's the lowest in 34 months and compares with an estimate of 46 published on April 23rd. A reading below 50 indicates contraction.

A separate report today may show the unemployment rate rose in March from a 14-year high in February. While manufacturing growth in the US and China, the world's two largest economies, accelerated last month, factory production across Europe is mired in a slump as countries from Spain to the Netherlands slip back into recession.

The European Central Bank will probably keep its benchmark interest rate at a record low tomorrow. "We're worried about the industrial cycle in the euro area at the moment as there are a lot of headwinds in the periphery that need to be overcome," said Jens Sondergaard, an economist at Nomura International Plc in London.

"There is a small glimmer of hope that external demand will pick up, as we've seen in the China and US numbers, and if that continues that will be positive in the months ahead."

A manufacturing purchasing managers' index for Italy fell to 43.8 last month from 47.9 in March, according to a separate report today. A gauge for Germany slipped to 46.2 from 48.4, while France's measure rose to 46.9 from 46.7, less than initially estimated. German Jobless

A separate report today showed German unemployment unexpectedly rose for the first time in six months in April. The number of people out of work increased a seasonally adjusted 19,000 to 2.87 million, the Nuremberg-based Federal Labor Agency said.

"The positive trend on the labor market remains intact, but the economy has lost momentum," Frank-Juergen Weise, the agency's president, said.

Manufacturers are also facing pressure from rising costs as oil prices increase. Stuttgart, Germany-based Robert Bosch GmbH, the world's biggest car-parts supplier, said on April 26th that it will be harder to meet profit targets as high raw-material costs and spending on new business areas hurt margins.

"Economic uncertainties remain high, even if the euro-zone debt crisis has relaxed slightly," chief executive Franz Fehrenbach said.

In the US, the Institute for Supply Management said yesterday that its factory index rose to 54.8 in April, exceeding all 79 forecasts in a Bloomberg survey of economists.

A measure of Chinese production rose to the highest in a year last month, data yesterday showed.

ECB president Mario Draghi said last week that European leaders need to create a "growth compact" as spending cuts across the region dampen activity and prompt a backlash. The central bank will probably keep its key interest rate at a record-low 1 percent at a meeting tomorrow in Barcelona, Spain. Officials hold policy meetings outside Frankfurt twice a year.

Bloomberg