Wednesday, 1 July 2009

UPDATE: Euro-Zone Manufacturing Decline Slows Further In June

UPDATE: Euro-Zone Manufacturing Decline Slows Further In June

(Adds detail, chief economist comment)

   By Nicholas Winning
Of DOW JONES NEWSWIRES


LONDON (Dow Jones)--The contraction in euro-zone manufacturing output moderated for the fourth consecutive month in June, a fresh sign that the severe economic downturn in the currency block is gradually bottoming out, final data from Markit Economics showed Wednesday.

However, there were marked differences in the pace of recovery in the region's largest economies, with Germany and Italy still suffering sharp downturns in manufacturing, while France inched closer to stabilization.

The purchasing managers' index for manufacturing in the euro zone -a closely watched gauge of activity in the sector -recovered to a nine-month high of 42.6 in June from 40.7 in May, topping the preliminary June reading of 42.4, Markit said.

Although the result was stronger than the market consensus estimate of 42.4 from a Dow Jones Newswires survey of economists last week, it marked the 13th consecutive reading below the neutral 50.0 level and extended the longest period of recession in the sector in the survey's history.

Chris Williamson, the chief economist at Markit, noted that output and new orders were nearing stabilization in some countries, notably France and the Netherlands.

"However, the PMI remains lower even than levels sunk to in the aftermath of 9/11, reflecting below-par output trends in Germany, Spain and Italy," he said in a statement. "Pressures to cut employment also clearly remain intense across the region, as firms struggle in the face of falling demand," he added.

The data for the currency block's largest economies showed the French manufacturing PMI rose to an 11-month high of 45.9 from 43.3 in May, beating market forecasts for a rise to 45.5.

A reading below 50 indicates a contraction in activity while a reading above 50 reflects an expansion.

But in Germany, the manufacturing PMI remained depressed, inching up to an eight-month high of 40.9 in June from 39.6 the previous month and above economists forecasts of 40.5. Italy's PMI rose to a nine-month high of 42.7 from 41.1 in May - also beating market predictions of 42.4.

-By Nicholas Winning and Ilona Billington, Dow Jones Newswires; +44 207 842 9498; nick.winning@dowjones.com

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