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Eurozone manufacturing shows some improvement

Eurozone manufacturing shows some improvement
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The downturn in eurozone manufacturing eased markedly in May for the first time in four months.

However it remained widespread according to the latest business surveys which showed falling prices for factory goods failed to attract more buyers.

There was an improvement in the numbers for the eurozone’s four biggest economies – Germany, France, Italy and Spain.

The responses to questionaires sent to purchasing managers in the manufacturing sector still did not reveal any growth but were the best since February last year.

The Eurozone Manufacturing Purchasing Managers’ Index rose to 48.3 from April’s 46.7, coming in ahead of an earlier flash reading of 47.8 but spending its 22nd month below the watershed 50 level that divides growth from contraction.

Markit – the company that carried out the surveys – said they suggest the eurozone’s economy is likely shrank by 0.2 percent in the second quarter of the year.

“Although the euro area manufacturing economy continued to contract in May, it is reassuring to see the rate of decline ease to such a marked extent,” said Chris Williamson, chief economist at Markit.

British manufacturing expands

A strong rise in new orders helped British manufacturing grow at its fastest pace in over a year last month.

Revised data for April meant UK factories have now had a two-month expansion.

The Markit/CIPS Purchasing Managers’ Index rose to a 14-month high of 51.3 in May, and April’s figure was revised up to above the 50-mark that divides growth from contraction.

Factory output contracted 0.3 percent in the first three months of 2013 and has been a drag on growth for much of the past year, but May’s figures offered a positive outlook, with orders rising at their fastest pace in more than two years.

However, weak lending data from the Bank of England highlighted the ongoing challenges facing the economy.

Banks and building societies taking advantage of the Bank’s Funding for Lending Scheme cut lending by 300 million pounds (353 million euros) in the first three months of the year, leaving the central bank hoping for a pick-up later in 2013.

But economists said the strong manufacturing data made it increasingly unlikely that policymakers would return to their previous approach of large-scale bond purchases, either at BoE Governor Mervyn King’s last rate-setting meeting this week or once Mark Carney succeeds him on July 1.