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Key eurozone growth indicator slows sharply in June

23 June 2011, 20:50 CET
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(BRUSSELS) - A key indicator of eurozone private sector growth slowed in June to its weakest level in 20 months, dragged down by a sharp slowdown in manufacturing activity.

"The euro area's economic growth surge has lost momentum at a worrying rate in the past two months," said Chris Williamson, chief economist at Markit, the research firm that surveys 4,500 businesses in the 17-nation eurozone.

The Purchasing Managers Index (PMI) fell to 53.6 points in June from 55.8 points the previous month, its weakest performance since October 2009.

Despite the fall, the index remains above the 50-point mark indicating growth.

The manufacturing sector saw a sharp drop, from 54.6 in May to 52 points in June, while services also slowed from 56 to 54.2 points.

"Even German manufacturing, the driving force of the region's recovery, has seen a marked deterioration in output and new orders growth -- linked to a large extent to a severe weakening of export order book growth," Williamson said.

"Meanwhile, the euro area excluding France and Germany has fallen back into contraction for the first time since late-2009," he said.

The eurozone posted growth of 0.8 percent in the first quarter, picking up steam after a mere 0.3 percent in the last three months of 2010.

Economists say the single currency area, scrambling to contain a debt crisis in Greece, will struggle to retain that pace of growth.

"The PMI surveys point to joint eurozone manufacturing and services output slowing sharply to a 20-month low in June, thereby reinforcing belief that Eurozone growth is now slowing appreciably," said Howard Archer of IHS Global Insight market research group.

"Tighter fiscal policy is increasingly kicking in across the region, the ECB (European Central Bank) has started raising interest rates and sovereign debt tensions have intensified centered on Greece's woes," he said.


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