AS THE UK seemed to be hinting at recovery yesterday, data from the continent showed the Eurozone economy is contracting as consumers cut back, output fell in the manufacturing and services sectors, and borrowing costs rose in weak countries as the sovereign debt crisis reared its head again.
France, Spain and Italy all saw output fall in March, Markit’s purchasing managers’ index (PMI) showed yesterday, while Germany’s economy slowed to a crawl. Employment fell for the third straight month, Markit said, as high oil prices pushed up costs at their fastest pace in nine months and new orders declined again.
Retail sales fell 2.4 per cent in the year to February as consumers remained unwilling to spend in a tough economic environment. The drop was led by huge falls of 9.6 per cent in crisis-hit Portugal and 6.2 per cent in Spain.
Worries over sovereign debt also flared up again, as Spain failed to raise as much as it hoped in an auction, selling only €2.59bn (£2.14bn) in eight-year bonds when it wanted €3.5bn. The news saw markets plunge with the FTSE 100 closing 134.5 points down – its worst daily fall in four months.
Borrowing costs on 10-year debt rose to 5.4 per cent for Italy and 5.7 per cent for Spain – above the level in December when the European Central Bank stepped in to stabilise markets with a €1 trillion cash injection.
Unrest also returned to Greece, sparked by the suicide of a pensioner who blamed crippling debts for his act.