Robotic arms manufactured by Kuka AG operate on a Volkswagen Passat saloon chassis on the automated welding production line inside the VW factory in Emden, Germany. (Photographer: Krisztian Bocsi/Bloomberg)

Manufacturing Slump Deals Another Blow to Europe’s Economic Outlook

(Bloomberg) -- Germany’s contracting manufacturing sector held back euro zone growth this month as global trade tensions continued.

IHS Markit’s composite Purchasing Managers’ Index for the region slipped to 51.3. Economists expected an improvement to 52.

Manufacturing contracted while activity in services held steady. Growth was probably 0.2 percent in the first quarter based on the survey, Markit said.

Manufacturing Slump Deals Another Blow to Europe’s Economic Outlook

The euro fell 0.6 percent to trade at $1.1309 as of 10:12 a.m. in Frankfurt.

The European Central Bank this month recognized that the economy is weakening by announcing a new program of long-term loans for banks. Officials say they’re still determining whether the slowdown is temporary after they ended a bond-purchase program at the end of 2018.

“The euro zone economy ended the first quarter on a soft note, with the flash PMI running at one of the lowest levels seen since 2014,” said Chris Williamson, chief business economist at Markit. “Forward-looking indicators such as business optimism and backlogs of work suggest that growth could be even weaker in the second quarter.”

German manufacturing shrank for a third month. The French economy slipped back into contraction after improving in February, Markit reported earlier.

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