05.03.2012
By Simon Miller
The eurozone is unlikley to avoid recession following disappointing Purchasing Managers' Index (PMI) figures across the region.
Although Germany did better than expected - rising to 52.8 in February from 52.6 in January - France stumbled on the brink of contraction at 50.0, slightly down from 50.3 last month.
The Italian services sector increased its rate of shrinkage falling from 44.8 to 44.1 while Spain was the worst performance with PMI falling sharply to 41.9 from 46.1.
However, there was better news for Ireland which saw a 12-month high of 53.5.
The Markit Eurozone PMI Composite Output Index fell from 50.4 in January to 49.3 in February, dropping below the earlier flash estimate of 49.7. According to Markit, the final reading confirmed that business activity contracted in February, having briefly returned to growth in January following four months of decline at the end of last year.
"The overall contraction in output reflected a renewed decline in service sector activity. Manufacturing registered a marginal increase in output for the second month in a row," the report added.
Chris Williamson, chief economist at Markit said: "With business activity falling again in February, and to a slightly greater extent than the earlier flash PMI signalled, it remains a close call as to whether the Eurozone contracted for a second successive quarter, sending the region back into recession."
He added: "At this stage, our best estimate is that the region’s GDP will have contracted by 0.1% in the first three months of the year. Perhaps more worryingly, the ongoing steep declines signalled by the weak surveys for Italy and Spain suggest that a return to growth for these countries still looks to be a long way off. Companies there are still slashing employment and cutting prices to help stay in business."
The UK also saw disappointing PMI figures that, although growing, were at a slower rate of 53.8 compared with 56.0 in January and an expected 55.0 from analysts.
Williamson commented: "Despite seeing some loss of momentum in February, the service sector continued to grow at a robust pace, adding to signs that a double-dip recession will be avoided. So far this quarter, the sector has notched up its best performance since the spring of 2010, when the economy was rebounding strongly from the recession."
Other stories you may find of interest:
UK banks have £15bn exposure to PIGS debt
UK banks had a £15bn exposure to the sovereign debt of Greece, Portugal, Italy and Spain in Q3 2011 according to a report from TheCityUK.
