Euro Watch: Euro Zone Economy’s Slide Accelerates, Data Show

An index of euro zone purchasing managers by Markit Economics fell in March to 46.5 from 47.9 in February, with the rate of decline worsening for the second month in a row.

The purchasing managers composite index has fallen in every month but one since September 2011. An index above 50.0 suggests economic expansion, while a level below that suggests contraction.

The economy of the 17-nation euro zone, which accounts for nearly three-quarters of the overall E.U. gross domestic product, shrank for a fifth straight quarter at the end of 2012, and indications suggest that trend will continue in January through March period.

A record jobless rate of 11.9 percent and government budget-balancing measures have hurt household spending across most of Europe, even as the United States continues to grow modestly.

Separate Markit reports showed both the German and French economies, the two largest in the euro zone, losing steam. The German composite index came in Thursday at 51.0 for March, down from 53.3 in February. The French composite index was worse, falling to 42.1 for March from 43.1 in February, as service and manufacturing activity declined.

Martin van Vliet, an economist at ING Bank in Amsterdam, said the report Thursday “pours cold water on hopes of an imminent end to the euro zone recession,” as it showed domestic demand remaining weak across Europe.

Mr. van Vliet said he had “penciled in a return to growth” for the euro zone in the second quarter, led by a German rebound, after a small January-March contraction. But with Germany now apparently slowing and Cyprus struggling to work out a bailout, he said, both the first and second quarters may now disappoint expectations. Mr. van Vliet said it was also looking increasingly likely that his forecast for a 0.3 percent contraction of the euro zone this year would turn out to be too optimistic.

The data contrast with a continuing uptick in euro zone economic sentiment. The European Commission said in February that its economic and business confidence indicator in the 17 countries using the euro had improved for the fourth straight month last month, as industrial orders rose.

Article source: http://www.nytimes.com/2013/03/22/business/global/daily-euro-zone-watch.html?partner=rss&emc=rss