Advertisement
Advertisement
Supported once again by Germany, output across the euro zone remained solid, pointing to GDP growth of 0.4pc to 0.5pc this quarter. Photo: Reuters

Euro zone business growth eases, underpins likely ECB policy move

Slowdown comes despite companies cutting their prices for 26 months running

Euro zone business growth eased in May and firms cut prices for the 26th consecutive month, a survey showed, likely underpinning expectations for the European Central Bank to loosen policy today.

While output across the region remained solid, supported once again by Germany and pointing to euro zone gross domestic product growth of 0.4 per cent to 0.5 per cent this quarter, French business activity slipped into contraction after just two months of growth. Similarly, accelerating growth in the service industry was offset by an easing in manufacturing.

"Although the euro zone is enjoying its best performance for three years, this is an uneven, stuttering and lacklustre recovery," said Chris Williamson, chief economist at survey compiler Markit.

Markit's composite purchasing managers' index, widely seen as a good gauge of growth, dipped to 53.5 in May, shy of a flash reading of 53.9 and below April's final 54.

The slowdown in growth came despite firms again cutting their prices.

The output price index nudged up to 48.8 from 48.7 but has held below the break-even mark since April 2012.

"The overall rate of growth is just not strong enough to allow firms to push through price hikes. This is perhaps the final nail in the coffin for hopes of a robust recovery without stimulus," Williamson said.

ECB policymakers have flagged a policy move today and sources said last month the bank was preparing a package of policy options and targeted measures aimed at boosting lending to small- and mid-sized firms.

Euro zone price inflation fell unexpectedly last month, coming in at just 0.5 per cent, data showed, increasing the risks of deflation in the currency area and virtually sealing the case for the ECB to act this week.

This article appeared in the South China Morning Post print edition as: Euro zone business growth in May eases
Post