Output mirrors euro-area economic ills

Bloomberg News
June 23, 2012 at 8:22PM
International Monetary Fund head Christine Lagarde spoke with Jean-Claude Juncker, right, president of the euro group, and Luxembourg's economy minister, Luc Freiden, on Thursday.
International Monetary Fund head Christine Lagarde spoke with Jean-Claude Juncker, right, president of the euro group, and Luxembourg’s economy minister, Luc Freiden, on Thursday. (Associated Press/The Minnesota Star Tribune)

Euro-area manufacturing output shrank at the fastest pace in three years in June, and a Chinese output gauge indicated contraction as Europe's fiscal crisis clouded global economic-growth prospects.

A gauge of euro-region manufacturing fell to 44.8 from 45.1 in May, London-based Markit Economics said last week in an initial estimate. That's the lowest in 36 months.

The preliminary reading was 48.1 for a Chinese purchasing managers' index from HSBC Holdings PLC and Markit. A reading below 50 indicates contraction.

The euro area's turmoil is undermining global growth by eroding the confidence of investors and consumers as companies step up job cuts.

Manufacturing in the United States probably expanded at a weaker pace in June, a Bloomberg News survey shows.

While Greece's Antonis Samaras was sworn in as prime minister with a coalition that will seek relief from austerity measures, Group of 20 leaders this week pushed Europe to step up measures that might contain the crisis.

"No significant recovery can be expected as long as the future of the eurozone remains in doubt," said Peter Vanden Houte, an economist at ING Group in Brussels.

A euro-area composite index based on a survey of purchasing managers in the services and manufacturing industries held at 46, the same reading as in May, Markit said.

In China, the purchasing managers' index is at the lowest level since November 2011 and has equalled a run of below-50 readings from August 2008 to March 2009.

The data added to concerns that growth in Asia is in danger as the world grapples with the continuing debt crisis in Europe. Bank of Japan Governor Masaaki Shirakawa said that Europe poses the biggest risk as his nation's economy returns to the path of "moderate recovery."

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SIMONE MEIER

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