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Eurozone manufacturing sinks deeper in red: survey

01 June 2012, 12:16 CET
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(BRUSSELS) - Eurozone manufacturing activity sank deeper in May, hitting its lowest level in three years as employers shed jobs and crisis-struck Spain hit bottom, a key survey showed on Friday.

The sector suffered "steep drops" in output and new orders last month, causing the Purchasing Managers Index reading by Markit research firm to fall to 45.1 points in May from 45.9 points in April.

A score below 50 points indicates contraction.

"Eurozone manufacturers reported a deepening downturn in May, indicating that the damage to the real economy caused by the region's financial and political crises continues to spread across the region," said Markit chief economist Chris Williamson.

"The rate of decline is nowhere near as severe as that seen at the height of the 2008-09 crisis, but the situation is nevertheless deteriorating at an alarming rate," he said.

The PMI, a survey of 3,000 manufacturing firms, has now signalled contraction in each of the past 10 months. The May reading was the lowest since mid-2009.

The survey brought more gloomy news to Spain as the country, already battling to avoid the need for a bailout, replaced eurozone weakling Greece at the bottom of the list with a reading of 42 points.

The weakness in southern Europe continued to spread to wealthier nations as the PMI for eurozone top economy Germany and second-ranked France fell to their lowest levels in three years.

Ireland, which was bailed out along with Portugal and Greece, was the only nation to record an expansion in May while Austria's PMI was near stagnation. The downturn accelerated in the Netherlands.

Manufacturers continued to cut costs in May and employment fell for the fourth month in a row, with the rate of job cuts accelerating in Germany, France, Spain and the Netherlands. The steepest cuts were in Greece.

The eurozone's biggest economies, Germany, France, Italy and Spain, "are now reporting worryingly sharp downturns in their manufacturing sectors," Williamson said.

"But the situation is perhaps now the most intense in Spain, where the PMI fell below that of Greece to signal the steepest deterioration of business conditions of all countries surveyed."


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