Fresh Eurozone fears as output shrinks again

Elizabeth Fournier
ANOTHER onslaught of gloomy data from the Eurozone raised fears yesterday that the single currency area will fall further into recession this quarter, as business activity shrank even in economic powerhouse Germany.

Markit’s latest composite purchasing managers’ index edged up very slightly from 46.5 in March to 46.9 in April, but remained well below the crucial 50 level – scores need to be above 50 to indicate growth.

Overall output has now declined in every one of the last 15 months and is now significantly below the levels recorded just two months ago, when February’s figure was revised up to 47.9. Poor manufacturing and services data pushed the bloc’s largest economy, Germany, back into contraction for the first time since November last year, as new orders also slipped to a five-month low.

Though the speed of the slowdown eased in France, Italy and Spain, growth remained well out of reach, with all three countries stuck below the composite figure of 46.9.

“The survey does little to dilute suspicion that the Eurozone is headed for further GDP contraction in the second quarter after highly likely suffering a sixth successive quarter of contraction in the first quarter of 2013,” said Howard Archer at IHS Global Insight.

Meanwhile Eurostat said yesterday that retail sales across the single currency had fallen for the second consecutive month, with Spanish consumers leading the decline.

March sales fell by 0.1 per cent month-on-month following a 0.2 per cent contraction in February, dragging annual numbers down by 2.4 per cent. Spanish sales were down a huge 10.5 per cent compared to a year ago.

Despite the downbeat data, investor sentiment in the euro area has risen to minus 15.6 in May from minus 17.3 in April, after uncertainties over Cyprus and Italy eased.

“While investors’ assessments of the economy for the Eurozone are stabilising, those for Germany are clouding a little, albeit at a significantly higher level,” research group Sentix, which compiled the data, said.