Euro-Area April Manufacturing Contracts for 21st Month: EconomyPatrick Henry
Euro-area manufacturing output contracted for a 21st straight month in April, adding to pressure on the European Central Bank to cut interest rates to spur lending and growth.
A gauge of manufacturing in the 17-nation euro area declined to 46.7 last month from 46.8 in March, London-based Markit Economics said today. That’s above an initial estimate of 46.5 on April 23. A reading below 50 indicates contraction.
With the euro-area economy mired in a recession, the ECB’s Governing Council will cut its benchmark rate today to a record low 0.5 percent from 0.75 percent, according to the median of 70 economists’ estimates in a Bloomberg News survey. The Frankfurt-based central bank sees the economy shrinking 0.5 percent in 2013.
The Markit report “isn’t going to give the ECB anything new to use at today’s press conference other than further confirmation,” Victoria Clarke, an economist at Investec Securities in London, said by telephone. “The euro-area economies are stuck in the mud. Something is needed to get them moving again.”
The euro pared losses against the dollar after the data were released, trading at $1.3168 at 11:22 a.m. in Brussels, down 0.1 percent on the day.
The euro-zone economy has contracted for five consecutive quarters. That trend is forecast to continue in the first three months of this year before a return to growth in the second quarter, according to a separate Bloomberg survey of economists. Inflation cooled to a three-year low in April, and March unemployment rose to a record 12.1 percent.
Siemens AG, Europe’s largest engineering company, cut its full-year forecast today amid a slowdown in orders for some offerings and charges for the delayed delivery of trains. Net income from continuing operations will approach the low end of its 4.5 billion-euro ($5.9 billion) to 5 billion-euro target, the Munich-based company said.
Bayerische Motoren Werke AG, the world’s biggest maker of luxury cars, reported a 4.5 percent drop in first-quarter profit as the plunging European market pushed car prices lower. Earnings before interest and taxes fell to 2.04 billion euros from 2.13 billion euros a year earlier, the Munich-based company said today.
“There is nothing here to suggest that manufacturing will turn the corner and stabilize any time soon, putting greater onus on policy makers to act quickly to reinvigorate growth,” Chris Williamson, chief economist at Markit, said in today’s report.
The euro-area economic gloom contrasted with the U.K., where an April factory index released yesterday by Markit and the Chartered Institute of Purchasing and Supply rose more than economists forecast, adding to signs the economy may be starting to recover. The gauge rose to 49.8 from 48.6 in March.
U.K. construction shrank less than economists forecast in April as homebuilding strengthened, Markit said in a separate report.
In Asia, the purchasing managers’ index for China released today by Markit and HSBC Holdings Plc fell to 50.4 from 51.6 in March, adding to signs that a growth slowdown will persist in the world’s second-biggest economy.
The drop follows a decrease in an official manufacturing index reported yesterday and lower-than-estimated gains in industrial output in the first quarter.
U.S. manufacturing expanded in April at the slowest pace this year and companies took on the fewest workers in seven months, adding to evidence of a slowdown in the world’s largest economy.
In the euro area, ECB President Mario Draghi has stoked expectations that officials will deliver a rate cut today even as they doubt its impact.
Faced with a struggling economy and limits on the potency of conventional means to stimulate it, the ECB could also consider options including long-term loans, corporate-bond purchases and forward guidance on interest rates.
The ECB decision is due at 1:45 p.m. in Bratislava, where the Governing Council is meeting this month. Draghi holds a press conference in the Slovakian capital 45 minutes later.