Germany at hub of Euro zone woes

Euro zone manufacturing activity shrank to a three-year low in May as an index based on surveys of purchasing managers across the region unexpectedly dropped to 44.6 for the month from 45.8 in April.

So the latest figure was further below the 50 level that indicates contraction, according to a report from S&P Global. A similar gauge of services also fell, though its reading of 55.9 still signals robust expansion.

And the overall PMI fell to 53.3 in May from April's 54.1, the report showed.

The report adds to mounting evidence that the manufacturing woes of Germany, Europe's biggest economy, are an increasing drag on the wider region.

It chimes with a survey released on Monday by the DIHK business lobby, which pointed to zero growth in Germany this year as companies see no evidence of a pickup taking hold.

The PMI numbers do still signal overall expansion, though they leave a question mark over its pace, potentially casting doubt on whether the euro zone can achieve the growth of as much as 0.4 percent per quarter shown in European Commission forecasts released last week.

"GDP is likely to have grown in the second quarter thanks to the healthy state of the services sector," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

"However, the manufacturing sector is a powerful drag on the momentum of the economy as a whole. German companies from this sector are particularly hard on the brakes."