European Manufacturing Growth Unexpectedly Slowed (Update2)
By Ben Sills
June 1 (Bloomberg) -- Manufacturing in the euro region expanded at the slowest pace in more than a year in May, signaling that economic growth may have peaked.
Royal Bank of Scotland Group Plc's index of manufacturing in the 13 euro nations unexpectedly fell to 55 from 55.4 in April, Reuters Plc reported. Economists forecast an increase to 55.5, according to the median of 38 estimates in a Bloomberg News survey. The index is based on a survey by NTC Economics Ltd. of 3,000 purchasing managers.
European growth may cool from the fastest pace in six years as rising interest rates and a U.S. slowdown curb demand for the continent's cars, machinery and appliances. Still, the European Commission forecasts the economy will expand 2.6 percent in 2007, close to last year's 2.7 percent pace and enough to prompt the European Central Bank to push rates higher.
``The momentum in manufacturing is beginning to ebb,'' Ken Wattret, chief European economist at BNP Paribas in London said. ``If this continues, which we would expect, that does raise some question marks about how far the ECB will go. We're pretty skeptical that they'll go beyond 4.25 percent.''
Euro Declines
The euro fell against the dollar and investors trimmed bets the ECB will push its benchmark 3.75 percent rate much higher, with the yield on the three-month euribor future for December delivery falling to 4.525 percent at 11:43 a.m. from 4.53 yesterday.
The contracts settle to the three-month inter-bank offered rate for the euro, which has averaged 16 basis points more than the ECB's benchmark rate since the currency's start in 1999.
The euro-zone economy grew more than expected in the first quarter, expanding 0.6 percent, while U.S. growth slowed to a four-year low of 0.3 percent.
German retail sales in April increased the most since December, a separate report showed today. Investor confidence in Germany jumped to an 11-month high in May as economists ratcheted up their growth forecasts for Europe's largest economy. The government increased its 2007 growth outlook to 2.3 percent from 1.7 percent in April.
European business and consumer confidence both rose in May to the highest level since 1991, a report showed yesterday.
Unemployment Falls
Manufacturing growth is also driving employment gains and fueling concern that wage increases will spark inflation and higher interest rates. The European jobless rate fell to 7.1 percent in April, the lowest since the start of region-wide data in 1993, The EU's Luxembourg-based statistics office said today.
The ECB is set to raise interest rates for the eighth time since the end of 2005 next week. Jean-Phillipe Cotis, chief economist at the Organization for Economic Cooperation and Development said yesterday he expects at least one additional move after the ECB lifts its benchmark rate to 4 percent this month.
DAF Trucks NV, the Dutch division of U.S. truckmaker Paccar Inc., said it plans to increase production at its main plant by about 5 percent next month as European freight transporters expand fleets to handle the increased flow of goods within Europe. MAN AG, Europe's no. 3 truckmaker, reported record earnings as sales increased in eastern Europe.
Retail Sales
There are other signs that the euro-region expansion may be cooling. Export growth slowed to 0.3 percent in the first quarter after 3.5 percent in the first. Retail sales in the euro area fell for the first month in three in May and French business confidence declined.
In manufacturing, new orders gained at the slowest pace since November 2005, with the index reading 55.4 after 55.8 in April, today's report said. Output growth slipped to 56.1 from 56.9, the least since February 2006. Employment growth maintained the fastest pace of growth in 6 1/2 years, with the index reading 53.3, the report said.
European growth will ease to an annual 2.2 percent pace by the fourth quarter from 3.1 percent in the first as slower U.S. growth trims global demand, according to the median of 16 estimates in a Bloomberg News Survey of economists.
``In the U.S. we expect the market's growth to be significantly lower in 2007 compared with 2006,'' Alexandre Saubot, chief executive officer of Haulotte Group, a French maker of cherry-picker trucks for roofers, said May 14.
Thales SA Chief Executive Officer Denis Ranque said orders at Europe's largest defense-electronics company peaked in the first quarter.
So far, faster economic growth in Asia is easing the effect of the U.S. slowdown. Alstom SA, the world's second-biggest train maker, said full-year profit more than doubled as China upgraded its rail network.
By Ben Sills
June 1 (Bloomberg) -- Manufacturing in the euro region expanded at the slowest pace in more than a year in May, signaling that economic growth may have peaked.
Royal Bank of Scotland Group Plc's index of manufacturing in the 13 euro nations unexpectedly fell to 55 from 55.4 in April, Reuters Plc reported. Economists forecast an increase to 55.5, according to the median of 38 estimates in a Bloomberg News survey. The index is based on a survey by NTC Economics Ltd. of 3,000 purchasing managers.
European growth may cool from the fastest pace in six years as rising interest rates and a U.S. slowdown curb demand for the continent's cars, machinery and appliances. Still, the European Commission forecasts the economy will expand 2.6 percent in 2007, close to last year's 2.7 percent pace and enough to prompt the European Central Bank to push rates higher.
``The momentum in manufacturing is beginning to ebb,'' Ken Wattret, chief European economist at BNP Paribas in London said. ``If this continues, which we would expect, that does raise some question marks about how far the ECB will go. We're pretty skeptical that they'll go beyond 4.25 percent.''
Euro Declines
The euro fell against the dollar and investors trimmed bets the ECB will push its benchmark 3.75 percent rate much higher, with the yield on the three-month euribor future for December delivery falling to 4.525 percent at 11:43 a.m. from 4.53 yesterday.
The contracts settle to the three-month inter-bank offered rate for the euro, which has averaged 16 basis points more than the ECB's benchmark rate since the currency's start in 1999.
The euro-zone economy grew more than expected in the first quarter, expanding 0.6 percent, while U.S. growth slowed to a four-year low of 0.3 percent.
German retail sales in April increased the most since December, a separate report showed today. Investor confidence in Germany jumped to an 11-month high in May as economists ratcheted up their growth forecasts for Europe's largest economy. The government increased its 2007 growth outlook to 2.3 percent from 1.7 percent in April.
European business and consumer confidence both rose in May to the highest level since 1991, a report showed yesterday.
Unemployment Falls
Manufacturing growth is also driving employment gains and fueling concern that wage increases will spark inflation and higher interest rates. The European jobless rate fell to 7.1 percent in April, the lowest since the start of region-wide data in 1993, The EU's Luxembourg-based statistics office said today.
The ECB is set to raise interest rates for the eighth time since the end of 2005 next week. Jean-Phillipe Cotis, chief economist at the Organization for Economic Cooperation and Development said yesterday he expects at least one additional move after the ECB lifts its benchmark rate to 4 percent this month.
DAF Trucks NV, the Dutch division of U.S. truckmaker Paccar Inc., said it plans to increase production at its main plant by about 5 percent next month as European freight transporters expand fleets to handle the increased flow of goods within Europe. MAN AG, Europe's no. 3 truckmaker, reported record earnings as sales increased in eastern Europe.
Retail Sales
There are other signs that the euro-region expansion may be cooling. Export growth slowed to 0.3 percent in the first quarter after 3.5 percent in the first. Retail sales in the euro area fell for the first month in three in May and French business confidence declined.
In manufacturing, new orders gained at the slowest pace since November 2005, with the index reading 55.4 after 55.8 in April, today's report said. Output growth slipped to 56.1 from 56.9, the least since February 2006. Employment growth maintained the fastest pace of growth in 6 1/2 years, with the index reading 53.3, the report said.
European growth will ease to an annual 2.2 percent pace by the fourth quarter from 3.1 percent in the first as slower U.S. growth trims global demand, according to the median of 16 estimates in a Bloomberg News Survey of economists.
``In the U.S. we expect the market's growth to be significantly lower in 2007 compared with 2006,'' Alexandre Saubot, chief executive officer of Haulotte Group, a French maker of cherry-picker trucks for roofers, said May 14.
Thales SA Chief Executive Officer Denis Ranque said orders at Europe's largest defense-electronics company peaked in the first quarter.
So far, faster economic growth in Asia is easing the effect of the U.S. slowdown. Alstom SA, the world's second-biggest train maker, said full-year profit more than doubled as China upgraded its rail network.
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