Euro zone business downturn points to deeper recession in second-quarter: PMI

Mon May 6, 2013 4:05am EDT
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By Jonathan Cable

LONDON (Reuters) - The euro zone's business downturn dragged on in April, suggesting the region may be falling deeper into recession this quarter, business surveys showed on Monday.

The purchasing managers indexes (PMIs) also showed that Germany is now suffering a contraction in business activity that has long dogged France, Italy and Spain.

Markit's Eurozone Composite PMI, which gauges activity across thousands of companies and is seen as a good gauge of economic conditions, edged up in April to 46.9 from 46.5 in March, marking an improvement on an initial reading of 46.5.

But the index has now been below the watershed 50 level that divides growth from contraction for over a year, and April's reading was far lower than those seen in January and February.

"The PMI suggests that, having eased in the first quarter of the year, the euro zone's economic downturn is likely to have gathered momentum again in the second quarter," said Chris Williamson, chief economist at Markit.

"The PMI is broadly consistent with GDP falling at a quarterly rate of 0.4-0.5 percent in April."

The euro zone economy chalked up its fifth straight quarter of contraction in the last three months of 2012, and a further downturn is predicted for the first quarter of 2013.

Economists expect only negligible growth this quarter, but the PMIs suggest even that view may be too optimistic.<ECILT/EU>   Continued...

A man looks at his wallet in the Andalusian capital of Seville March 15, 2013. Spain is deep in its second recession since 2009, and the economy is expected to continue to shrink through 2013, after a burst property bubble over four years ago gutted domestic demand, the key driver of a decade-long economic boom. The shop window reads "A week without VAT". REUTERS/Marcelo del Pozo