Key eurozone study highlights flagging private sector

BRUSSELS, May 23, 2008 (AFP) – A key survey released Friday boosted fears that the eurozone is flagging, pointing to a sharp slowing in business activity as soaring oil prices, the high euro and the US-born credit crunch take their toll. The widely-watched eurozone’s purchasing managers’ index (PMI), compiled by NTC Research, found that business activity in the 15 nations sharing the euro slowed in May to a 58-month low, amid the first drop in new business recorded since mid-2003.

The index slid to 51.1 points from 51.9 in April, nearing the sub 50-point level that would signify a contraction in activity.

The latest data “is consistent with our view that the euro area private sector will have ground to a halt by mid-year,” said Jacques Cailloux, economist for Royal Bank of Scotland (RBS).

Holger Schmieding at Bank of America was no less gloomy.

“After a strong start into 2008, the Eurozone economy looks set to slip well below its trend rate of growth shortly,” he warned.

“In manufacturing and services, purchasing managers became more pessimistic again in May as the headwinds from a grossly overvalued euro and high oil prices are exacting an ever heavier toll,” he added.

Crude oil prices bounced above 132 do