Eurozone factory growth stays weak in March despite deep discounting: PMI

[LONDON] Eurozone factories rounded off the first quarter in slightly better shape than initially thought but growth in activity remained weak despite the deepest price-cutting since late 2009, a survey showed on Friday.

The surveys suggest manufacturing is still dragging on the wider economy, and growth remained weak in Germany while activity contracted in France. But Spain, Italy, the Netherlands, Austria and in particular Ireland saw robust expansions.

Last month, the European Central Bank unleashed a bold easing package in its latest attempt to spur growth and drive up inflation - which at -0.1 per cent in March was nowhere near its 2 per cent target goal - but it doesn't seem to be working yet.

"The data suggest manufacturing grew by only around 0.2 per cent in the first quarter," said Chris Williamson, chief economist at survey compiler Markit "Policymakers will also be worried by the further intensification of deflationary pressures in manufacturing supply chains. Discounting was widespread as firms competed on price amid weak demand."

Despite the price-cutting and ECB stimulus, Markit's manufacturing Purchasing Managers' Index (PMI) for the eurozone only rose to 51.6 from February's year-low of 51.2.

That was slightly better than an earlier flash estimate of 51.4 and above the 50 mark that separates growth from contraction.

A sub-index measuring output, which feeds into a composite PMI due on Tuesday and is seen as a good guide to growth, climbed to 53.1 from 52.3, which was also a one-year low. The flash reading was 52.7.

The output price index came in below the flash reading of 47.4 at 47.1 and was well down on February's 47.6. The latest result was the lowest since December 2009.


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