Euro zone expansion eases in May / ECB to react?

02/06/2014

Euro zone manufacturing growth slowed more than initially thought last month, according to Markit’s final manufacturing Purchasing Managers’ Index.

Markit’s final manufacturing PMI slipped to a six-month low of 52.2 in May, from 53.4 in April, as strong figures from Germany failed to offset a contraction in activity in France.

The final figure was below the initial reading of 52.5 but still held above 50, indicating growth for the eleventh consecutive month.

The European Central Bank is expected to react to the slowdown in growth when it convenes on Thursday. To spur growth and boost lending, the ECB is widely expected to cut its deposit rate to a historical low of below zero, reduce its main borrowing rate and launch a refinancing operation aimed at businesses.

“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,” notes Markit’s chief economist Chris Williamson.