Eurozone growth slows in 'worrying' development

BRUSSELS: Growth across the eurozone slowed in May in a "worrying" sign that Europe's sovereign debt crisis could be weighing on broader economic activity, a research group said on Friday.

Business activity across the 16 nations that share the euro still rose but the closely-watched purchasing managers index (PMI) compiled by data and research group Markit fell to 56.2 in May from a post-recession peak of 57.3 in April.

IHS Global Insight analyst Howard Archer said that the news was a "hint that the eurozone debt crisis could be starting to have some dampening impact on economic activity."

Any score above the 50-point line indicates economic growth.

Despite the first increase in employment since June 2008, the figures were interpreted as "worrying signs of weakness" by Markit chief economist Chris Williamson.

"Of greatest concern, manufacturing saw the steepest slowdown in growth since the collapse (in September 2008 of US investment bank) Lehmans, linked in part to uncertainty in domestic markets as the debt crisis grabbed headlines," Williamson said.

While the overall expansion was the second-largest since August 2007, and the 10th successive monthly increase, manufacturing output posted its largest fall since November 2008 from a near 10-year peak of 57.5 in April to 55.9 in May.

Services output grew faster month-on-month.

The numbers came the day after the European Commission reported eurozone consumer confidence scraping a seven-month low in May after hitting a 23-month high in April.

They were released just hours before European finance ministers meet in Brussels, looking to agree strict new rules governing member state national budgets.