DATAWATCH Euro zone Q2 GDP seen weak after manufacturing PMI falls below 50
Monday, May 2, 2005 10:47:32 AM
afxpress.com
LONDON (AFX) - The euro zone economy looks to be losing momentum after data this morning showed the manufacturing sector contracted during April, raising fears over the prospects for growth in the coming quarters, analysts said
The latest survey of the euro zone manufacturing sector showed activity contracting in April for the first time since August 2003, with the purchasing managers' index falling to 49.2 from 50.4 in March
A reading below 50 indicates contraction, while a reading above 50 indicates expansion
"The weak PMI confirms that the situation with manufacturing in the euro zone is getting very difficult," said Bank of America economist Lorenzo Codogno
Although further confirmation in the form of indicators on other areas of the economy will be needed before any firm conclusion can be drawn, euro zone growth looks set to be very meagre over the coming quarters, he said
"We may have another phase of sluggish growth over the next few quarters, largely due to the high oil price," he said
Codogno said he may have to downgrade his forecast for growth in the second quarter of 0.2-0.3 pct
"Overall, it would be fair now to expect growth to be flat or show a very small acceleration in the second quarter," he said
The increasing volume of evidence that the euro zone economy is continuing to slow is also likely to severely dampen any prospects for an interest rate hike by the European Central Bank by the end of the year, and may even make a rate cut more likely
"The economy looks to be losing momentum, which suggests that the ECB should exercise caution where raising rates is concerned," Codogno said |
