Euro-Area Factory Growth Eases for Fourth Straight Month

(Bloomberg) -- Euro-area manufacturing grew at the slowest pace in more than a year in April, signaling that the region's economic expansion is continuing to slow after 2017's boom.

A Purchasing Managers' Index for manufacturing dropped to the lowest since March 2017, IHS Markit said on Wednesday. Although the reading is slightly higher than an initial estimate, it's a fourth straight decline. Italy's factory measure dropped to the lowest since January 2017.

“The manufacturing sector saw growth weaken further at the start of the second quarter, but let's not lose sight of the fact that the overall pace of expansion remains encouragingly solid,” said Chris Williamson, chief business economist at IHS Markit. “Although growth has slowed markedly compared to the start of the year, December had seen the best performance in over 20 years of survey data collection.”

European Central Bank officials meeting in Frankfurt last week decided that more time is needed to judge whether the recent spate of weaker-than expected data signifies a temporary trend or a more meaningful slowdown in demand. Policy makers have pledged to continue pumping stimulus into the economy through bond buying until at least September, and are largely expected to wind down the program by the end of the year.

IHS Markit said explanations for weaker data recently have ranged from capacity constraints to severe weather to flu. It also noted “anecdotal evidence” that a strong euro, rising prices and trade risks are taking a toll on demand.

“Uncertainty has also intensified due to worries regarding trade wars and Brexit, underscoring downside risks to the outlook,” Williamson said, “The trend in the surveys in coming months will provide important clues as to the degree to which underlying demand may be waning and the extent to which policy makers should be concerned about the health of the economy.”

--With assistance from Mark Evans and Fergal O'Brien

To contact the reporter on this story: Carolynn Look in Frankfurt at clook4@bloomberg.net.

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Zoe Schneeweiss

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