Euro-Area Growth Seen Slowing as Outlook Clouds Amid Weak Orders

EU Politics Impacting Economic Growth

Growth in the euro area’s private sector unexpectedly slowed in May, signaling that the region won’t maintain the strong pace of expansion recorded at the start of the year.

A Purchasing Managers Index slipped to 52.9 from 53 in April, London-based Markit Economics said on Monday. Economists surveyed by Bloomberg predicted an increase to 53.2. A gauge for services activity held at 53.1, while one for manufacturing fell to 52.4 from 52.6.

The 19-nation economy expanded 0.5 percent in the first quarter, the fastest pace in a year. With inflation still absent despite several rate cuts below zero and expansions of asset-purchase programs, the European Central Bank has become more vocal in urging governments to do their part in underpinning growth.

“The robust pace of economic growth seen in the first quarter will prove temporary,” said Chris Williamson, chief economist at Markit. “The survey therefore paints a picture of a region stuck in a low-growth phase, managing to eke out frustratingly modest output and employment gains despite various ECB stimulus ‘bazookas,’ a competitive exchange rate and households benefiting from falling prices.”

New orders grew at the weakest pace since January last year, pointing to subdued output growth next month at best, according to the report. Average selling prices continued to decline. Still, employment rose for a 19th month.

While PMIs for Germany and France signaled accelerating private-sector growth, expansions elsewhere in the region cooled, Markit said. Final data for May will be published starting June 1.

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