Euro zone factory expansion eases despite price cutting

Growth among euro zone factories cooled as expected last month but with output again rising across the board the bloc’s economic recovery appears more entrenched, a business survey showed on Tuesday.

However, Markit’s Purchasing Managers’ Index (PMI) also highlighted that firms have returned to cutting prices to drum up business.

"The survey paints a picture of a manufacturing recovery that is broad-based, with output rising in all countries surveyed for the second month running," said Chris Williamson, chief economist at data collator Markit.

The final manufacturing PMI came in at 53.0, matching an earlier flash reading but below February’s 53.2, while the output price sub-index dropped below the 50 mark that separates growth from contraction for the first time since August.

Euro zone inflation fell to just 0.5 per cent last month, its lowest since November 2009 and well below the European Central Bank’s 2 per cent target ceiling.

An index measuring output, which feeds into a composite PMI due on Thursday and is regarded as a good indicator of economic health, nudged up to 55.6 from February’s 55.3.

France showed further signs of recovery and German growth remained strong. Italy’s PMI rose a two-month high and Spain’s to a 47-month peak.

However, Mr Williamson cautioned slower order book and output growth may temper April’s numbers and that deflationary signals raised the likelihood of further stimulus from the ECB.

Reuters