FRANKFURT, Germany, June 23 (UPI) -- A fall in a major economic indicator in Europe shows the economy contracted in the Eurozone for the first time in five years, analysts said.
A decline in the Eurozone's purchasing managers' index has raised fears that stagnation -- inflation coupled with low growth -- could be gripping the economy, Financial Times reported.
Despite the contraction, the European Central Bank is likely to raise key interest rates a quarter percentage point to 4.25 percent to help slow inflation, which is at a 16-year high at 3.7 percent, the Times reported.
Germany, with the largest economy in Europe, maintained growth with a purchasing managers' index at 53.7, lower than last May's 55.0 but above the break even point of 50.
Even then, "the sharp hike in oil prices is evidently becoming an increasing burden on the German economy," said Hans-Werner Sinn, president of Munich's research institute Information and Forschung.
Overall, the purchasing managers' index dropped to 49.5 this month in the Eurozone, down from a reading of 51.1 in May.
