Eurozone slips back towards contraction

Tim Wallace
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ECONOMIC activity fell in the Eurozone in February, paving the way for a renewed recession across the currency area, new data showed yesterday.

However, retail sales expanded slightly in January, particularly in eastern European members of the EU.

Services activity fell in February, according to purchasing managers’ index (PMI) data from Markit, countering modest manufacturing growth and dragging the Eurozone into contraction.

The overall PMI figure came in at 49.3, below the no change mark of 50 and down on the 50.3 level registered in January.

Germany and Ireland expanded with PMIs of 53.2 and 52.3 respectively, while French output barely grew at 50.2 and Italy and Spain contracted sharply with PMIs of 44.7 and 42.9.

Meanwhile retail sales rose 0.3 per cent in January in the Eurozone and 0.4 per cent across the 27 EU members.

Latvia and Slovenia led the growth with expansion of 6.4 per cent and 5.5 per cent respectively, while Germany and Portugal’s declines of 1.6 per cent and 2.7 per cent put them among the worst performers for retail sales.

The trend data is far weaker, with a 0.8 per cent decline in the three months to January compared with the previous three-month period, matching the weakest performance since Spring 2009.

Economists warned January’s rise in sales is not expected to last.

“Rising unemployment, tighter fiscal policy, subdued consumer sentiment, a squeeze on real incomes from higher commodity prices and high levels of uncertainty provide a combination of factors suppressing consumer spending at the Eurozone aggregate level,” said BNP Paribas’ Ken Wattret.