LONDON, Aug 1 (Reuters) – – Manufacturing growth across the euro zone eased in July, a survey showed on Monday, and signs of a sharper slowdown outside powerhouse Germany may add to calls for the European Central Bank to loosen policy again.
Markit’s Purchasing Managers’ Index for the bloc fell to 52.0 in July from 52.8, just beating a flash estimate of 51.9. An index measuring output held comfortably above the 50 mark that separates growth from contraction at June’s 53.9.
“The problem is that growth is looking increasingly lop-sided, which will worry policymakers and add to calls for further stimulus from the ECB,” said Chris Williamson, chief economist at Markit.
“Dig deeper beyond the headline numbers and more worrying pictures appear. Expansions in output and employment are clearly being driven to a large extent by surging growth in Germany, while growth has almost stalled in both Italy and Spain, and contractions are being seen in France and Greece.”
The ECB kept interest rates unchanged last month but left the door open to more policy stimulus, highlighting “great” uncertainty and abundant risks to the economic outlook. It will soon be forced to extend and expand the scope of its asset purchase program, a Reuters poll found.[ECILT/EU]
The ECB will no doubt welcome a rise in the output price index to 49.9 from 49.3, its highest reading in nearly a year and an indication that factories are only barely cutting prices. Nevertheless, that still leaves the bank far short of its goal of an overall inflation rate of just below 2 percent.
Official data on Friday showed inflation was higher than expected last month, increasing to 0.2 per cent year-on-year. But the rate of economic expansion halved in the second quarter as French growth ground to a halt.
(Reporting by Jonathan Cable; Editing by Hugh Lawson)