Both growth and input-price inflation in the manufacturing sector of the 17 countries that share the euro dropped by the most in two-and-a-half years in the latest survey, according to The Wall Street Journal. On Wednesday, Markit reported that its final composite eurozone purchasing managers’ index dropped to a seven-month low of 54.6 in May from the reading of 58 seen in April, which marked the steepest monthly decline in the gauge since November 2008. The index remained above the critical marker of 50 that points to growth, although even the leading economies in the region saw the slowest manufacturing growth in four months or more.
The detailed report showed that Germany’s manufacturing sector posted strong growth, but still at the slowest rate in seven months. Italy and France posted six- and four-month growth rate lows, respectively, while peripheral countries struggled even more. Spain posted the lowest PMI reading in 16 months as its manufacturing sector slipped back into a contraction. Meanwhile, Markit’s chief economist, Chris Williamson, said that officials at the European Central Bank would likely be compelled by “The combination of weaker inflationary pressures and the steep easing in the pace of growth” to wait to tighten fiscal policy “until a clearer picture of the health of the recovery appears.”