Increase in jobless rate in Germany compounds region's economic woes

Eurozone manufacturing shrank for a ninth month in April, adding to signs an economic slump in the region is getting worse.

A factory gauge based on a survey of purchasing managers slipped to 45.9 from 47.7 in March, the lowest in 34 months, London-based Markit Economics said on Wednesday, with a reading below 50 indicating contraction.

A separate report showed the eurozone's unemployment rate rose in March to 10.9 percent, the highest in almost 15 years.

While manufacturing growth accelerated last month in the United States and China, the world's two largest economies, factory production across Europe is mired in a slump as countries from Spain to the Netherlands slip back into recessions.

The jobless rate in Germany increased last month for the first time in six months. The European Central Bank will probably keep its benchmark interest rate at a record low on Thursday.

"We're worried about the industrial cycle in the euro area at the moment as there are a lot of headwinds in the periphery that need to be overcome," said Jens Sondergaard, an economist at Nomura International Plc in London. "There is a small glimmer of hope that external demand will pick up, as we've seen in the China and US numbers, and if that continues that will be positive in the months ahead."

German unemployment

A manufacturing purchasing managers' index for Italy fell to 43.8 last month from 47.9 in March, according to a separate report on Wednesday. A gauge for Germany slipped to 46.2 from 48.4, while France's measure rose to 46.9 from 46.7, less than initially estimated.

A separate report on Wednesday showed German unemployment unexpectedly rose for the first time in six months in April. The number of people out of work increased a seasonally adjusted 19,000 to 2.87 million, the Nuremberg-based Federal Labor Agency said.

"The positive trend on the labor market remains intact, but the economy has lost momentum," said Frank-Juergen Weise, the agency's president.

Manufacturers are also facing pressure from rising costs as oil prices increase. Stuttgart, Germany-based Robert Bosch GmbH, the world's biggest car-parts supplier, said on April 26 that it will be harder to meet profit targets as high raw-material costs and spending on new business areas hurt margins.

"Economic uncertainties remain high, even if the eurozone debt crisis has relaxed slightly," Bosch Chief Executive Officer Franz Fehrenbach said.

In the US, the Institute for Supply Management said on Tuesday that its factory index rose to 54.8 in April. A measure of Chinese production rose to the highest in a year last month, data on Tuesday showed.

ECB President Mario Draghi said April 25 European leaders need to create a "growth compact" as spending cuts across the region dampen activity and prompt a backlash.

The central bank will probably keep its key interest rate at a record-low 1 percent at a meeting on Thursday in Barcelona, Spain, according to economists. Officials hold policy meetings outside Frankfurt twice a year.