LONDON — Hopes the euro zone might emerge from recession soon were dealt a blow on Thursday, as surveys showed the downturn in the region’s businesses worsened unexpectedly this month — especially in France.
Economists had expected that the Markit Flash Eurozone Services PMI, a business survey and one of the earliest monthly indicators of economic activity, would add to tentative signs that a recovery is in the offing.
But the indicator fell in February to 47.3 from 48.6, marking a year below the 50 threshold for growth and confounding expectations for a rise to 49.0 from more than 30 analysts polled by Reuters, none of whom forecast such a poor reading.
Markit said the schism between Germany and France — the two biggest economies in the euro zone — was now at its widest since the survey started in 1998.
While companies in Germany sustained a healthy rate of growth, French services companies are in the midst of their worst slump since early 2009, when the financial crisis and subsequent recession were doing their worst.
“If it wasn’t for Germany, these would be really dire readings,” said Chris Williamson, chief economist at Markit. “At least the German economy is still helping to keep the euro zone afloat in some respects.”
He said the latest survey pointed to the euro zone economy shrinking 0.2 percent to 0.3 percent in the first quarter, following an estimated 0.4 percent contraction at the end of last year.
A Reuters poll of economists last week suggested the economy would merely stagnate this quarter.
By far the most worrying aspect of the data released Thursday was the dismal performance of French companies.
Mr. Williamson said the data for France were more befitting a struggling “peripheral” euro zone economy like Spain or Italy, rather than the “core” status that France traditionally shares with Germany.
By contrast, Germany has enjoyed a good start to the year. German investor morale soared to its highest level in nearly three years this month, according to the ZEW research institute, while the federal statistics office said on Tuesday that employment hit its highest level in the fourth quarter since reunification.
Still, there are limits to what German prosperity can do for the rest of the region, blighted by harsh budget austerity and rising joblessness.
The latest Markit survey suggests that the “positive contagion” noted by the European Central Bank president, Mario Draghi, in January may be more in hope than expectation.
New orders at euro zone service sector companies — which include banks, information technology companies, hotels and restaurants — declined at a faster rate this month, with the index sinking sharply to 46.0 from 48.4 in January.
The survey also dashed optimism that the slump in euro zone factories would ease further in February, as the manufacturing index barely moved, to 47.8 from 47.9 in January.
Output fell at a faster rate, although new export orders brought at least a glimmer of hope, as the index rose to 51.7 in February from 49.5 – its first above-50 reading since June 2006.
The composite index, which combines both the services and manufacturing surveys, fell to 47.3 in February from 48.6 in January.
Companies cut more jobs, although not as quickly as in January, when layoffs rose at the fastest pace in more than three years.
Article source: http://www.nytimes.com/2013/02/22/business/global/daily-euro-zone-watch.html?partner=rss&emc=rss