EU Manufacturing Drops Dragged by France

Manufacturing growth in the eurozone slowed to a six-month low in May, according to a closely-watched survey.

The final Markit’s Eurozone Manufacturing Purchasing Managers’ Index (PMI) dipped to 52.2 in May, down from 53.4 in April. A figure above 50 indicates expansion.

Output growth in all nations, except the Netherlands, slowed.

It has fuelled expectations that the European Central Bank (ECB) will act to boost growth when it meets on Thursday.

Analysts say the central bank could cut its deposit rate to below zero and reduce its main borrowing rate.

“The May drop in the manufacturing PMI will inevitably add to the clamour for policymakers to provide a renewed, substantial boost to the region’s economy and ward off the threat of deflation,” said Chris Williamson, Markit’s chief economist.

IHS Global Insight economist Howard Archer said he expected the central bank to deliver a package of measures, including interest rate cuts and liquidity measures.

“The ECB seems highly likely to cut its refinancing rate from 0.25% to 0.15% or 0.10% and to take its deposit rate modestly into negative territory,” he said.

via BBC

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza