Misery builds for the euro zone

Fri May 4, 2012 9:01am EDT
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By Andy Bruce

LONDON (Reuters) - The euro zone economy worsened markedly in April, according to business surveys that clashed with the prospect of a gradual recovery augured by European Central Bank President Mario Draghi this week.

Friday's purchasing managers indexes (PMIs), primarily covering services, suggested a recession across Europe's currency union could now extend to mid-year and be deeper than previously thought.

They did, however, indicate better progress among Chinese companies.

Still, the overall tone of economic data on Friday was gloomy, given news the U.S. economy added only 115,000 non-farm jobs in April, far less than the 170,000 predicted.

Following the European Central Bank's policy meeting on Thursday, President Mario Draghi spoke of a gradual economic recovery taking place in the euro zone during the course of the year, although he did speak about risks.

The PMIs, however, have a much better record of tracking economic growth than the forecasts of ECB policymakers.

"If you look at Spain, then using the word recovery is an insult. Aggregated all together, it looks to us like (the euro zone economy) is contracting," said Danny Gabay, director at Fathom Financial Consulting in London.

"We've seen unemployment rise in a number of countries and in the so-called bailed out countries, you're seeing deflation and unemployment - some quite seriously negative numbers."   Continued...

European Central Bank (ECB) President Mario Draghi addresses a news conference following an ECB meting in Barcelona May 3, 2012. REUTERS/Gustau Nacarino