Euro zone factory activity falls, periphery pain intense

Thu Mar 1, 2012 4:07am EST
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LONDON (Reuters) - The euro zone's manufacturing sector contracted for the seventh straight month in February, with factories in the bloc's struggling indebted states facing some of the toughest conditions on record, a business survey showed on Thursday.

It looks increasingly possible that the 17-member euro zone is stuck in a mild recession, as new orders continued to fall and backlogs of work dry up, even in the region's most healthy economy Germany.

Markit's Eurozone Manufacturing Purchasing Managers' Index (PMI) rose to 49.0 last month from January's 48.8, in line with a flash reading but has now been below the 50 mark that divides growth from contraction since July.

"Whether the euro zone will sink back into recession in the first quarter remains highly uncertain. The periphery remains the major concern," said Chris Williamson, chief economist at data provider Markit.

The data comes a day after the European Central Bank's latest half-trillion euro cash injection into the euro zone's banks.

The funds have helped stabilize sovereign bond markets in countries such as Italy and Spain but accompanying austerity programs appear to have delivered a further blow to growth.

Manufacturing activity in near-bankrupt Greece shrank at the fastest pace in at least thirteen years as the country gears up for a fresh wave of cuts in return for much-needed bailout cash.

In Spain, where the government is also struggling to slash its public deficit, factories shed jobs at the fastest rate in more than two years, worsening employment prospects in a country where already more than one-in-five is out of work.