Survey raises concernes over eurozone recovery rate

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Rising concerns emerged Monday over the state of European economic recovery -- with key indicators slowing sharply, and eurozone stragglers behind Germany and France showing signs of stagnation, a widely-watched survey said.

London-based research giant Markit's composite eurozone index for manufacturing and services output, compiled via company purchasing managers' questionnaire replies, suggested eurozone growth slowed to a seven-month low in May.

Its index fell from 57.8 in April to 55.4 this month. Any score above 50 indicates growth, and May marked the 22 successive months of economic expansion. But the deceleration in the rate of growth was also the largest since November 2008, Markit said.

"It is not clear the extent to which this reflects temporary factors such as the timing of Easter and disruptions to supply chains emanating from the earthquake in Japan," said Chris Williamson, Markit chief economist, a view backed by external economists.

"But a deterioration in business confidence in the service sector to the weakest since July 2009 suggests that a more fundamental slowing in the pace of economic growth is occurring."

He said the data suggested growth of 0.7 percent would be achieved in the second quarter of 2011, after the survey accurately predicted 0.8 percent growth over the first three months of the year.

However, rising output and employment "remains very lop-sided," with the 15 other eurozone economies outside the big two seeing "a near-stagnation of output in May and a further drop in employment."

Even Germany saw a sharp slowing in its rate of expansion, although some good news was seen with a recent fall in oil and other commodity prices helping to slow the rate of inflation both for companies' input costs and selling prices, he added.

© 2011 AFP

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