Euro zone factory activity decline deepens in June, PMI shows

LONDON (Reuters) - Manufacturing activity across the euro zone took a turn for the worse last month as demand fell at a much faster pace despite factories cutting their prices, a survey showed.

HCOB's final euro zone manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, fell to 45.8 in June from May's 47.3, just ahead of a 45.6 preliminary estimate. It has been below the 50 mark separating growth from contraction for two years.

An index measuring output, which feeds into a composite PMI due on Wednesday that is seen as a good gauge of economic health, sank from May's 49.3 to a six-month low of 46.1, albeit just ahead of the 46.0 flash estimate.

"The PMI indices for all euro zone countries, except Italy, deteriorated in June. However, we are inclined to see this more as a temporary blip rather than a sign of a prolonged downturn," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

"Manufacturing growth was seen in other parts of the world in June, such as the United States, Britain, and India, according to their respective flash PMI. This global recovery provides a supportive backdrop for euro zone manufacturers."

A new orders index dropped to 44.4 from 47.3. That drop came despite factories cutting prices charged for a fourteenth month, although less steeply than in previous months.

"It's rather depressing that forward-looking new orders are falling at an accelerated pace," de la Rubia added.

"This decline comes after a record stretch of 25 consecutive months of falling demand, but a vague hope that things were improving in May when the respective index showed some increase."

(Reporting by Jonathan Cable; Editing by Christina Fincher)