The Reuters Eurozone Purchasing Managers' Index slipped again in June but was still at its third-highest level, while prices data showed inflation remained a threat despite a similar dip, according to data released yesterday.

Economists said the index, which measures the state of Eurozone's manufacturing industries, underlined the strength of the economy. The threat of rising inflation was as strong as ever even though the separate Reuters Eurozone Prices Index, which measures manufacturers' costs, also fell in June, they said.

The PMI, compiled from a survey of more than 1,500 euro zone manufacturing companies, was 59.5 in June, down from 59.7 in May and 60.7 in April, the highest reading in the indicator's 37-month history.

The June figure was also below economists' forecasts of 60.0. But any reading over 50 signals expansion, so 59.5 still shows that manufacturers are doing well, reflecting a general economic revival in the 11-country currency zone.

Economic recovery can bring the threat of inflation but the Prices Index was 72.7, well down from a record 76.7 in April. The figure, far over the 50 no-change level, still showed a strong rise in prices but the drop raised some eyebrows.

"This is a little surprising," said Mr David Naude at Deutsche Bank in Paris. With oil prices still strong and the euro weak, official data from leading euro zone countries are not encouraging. For instance, Italian producer prices rose 0.9 per cent in May and 6.4 per cent year-on-year, the highest annual rate since December 1995, data released yesterday showed.