Worsening eurozone PMI data threatens Q1 contraction

21 February 2013 10:54  [Source: ICIS news]

LONDON (ICIS)--Weak purchasing managers' index (PMI) data for the eurozone this February indicates a deepening economic downturn, hinting that the region may be facing its fourth consecutive quarter of economic contraction, according to financial information company Markit on Thursday.

Markit’s eurozone PMI composite output index fell to 47.3 in February compared with 48.6 in January, indicating that the decline in manufacturing and services output is starting to accelerate. PMI readings of 50.0 or below indicate a contraction.

“The decline signals a steepening of the economic downturn, contrasting with the easing trend seen in the previous three months,” the company said in a note on the latest data.

Although the decline in output is increasing compared with the previous couple of months, it is less steep than that seen in October 2012, when the index fell to a 40-month low of 45.7. As such, the anticipated decline may be less severe than the 0.6% GDP contraction seen in the fourth quarter of 2012, Markit added.

“Despite the fall in the PMI, the first quarter decline in the economy should be less severe than the 0.6% drop in GDP seen in the final quarter of 2012, with a contraction of 0.2-0.3% looking likely,” said Markit chief economist Chris Williamson

Germany’s output rose for the third consecutive month, while French output marked an accelerating rate of decline, indicating a growing disparity between the performance of two of the eurozone’s key economies. The rest of the eurozone also saw an overall decline during the period, Markit said.

“France’s downturn is likely to deepen, bringing the euro area’s second-largest member more in line with the periphery than with the now solitary-looking German ‘core’,” Williamson added.

By: Tom Brown
+44 208 652 3214

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