Services and manufacturing contract in EU

Updated: 2012-04-05 08:05

(China Daily)

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Eurozone services and manufacturing output contracted for a second month in March, adding to signs that the economy continued to shrink in the first quarter.

A eurozone composite index based on a survey of purchasing managers in both industries dropped to 49.1 from 49.3 in February, the London-based Markit Economics said on Wednesday. That's above an initial estimate of 48.7 on March 22. A reading below 50 indicates contraction.

Rising energy costs are sapping consumers' purchasing power just as global demand falters and governments across the region cut spending to plug their budget gaps. With economies from Ireland to Spain in recession and European confidence in the economic outlook weakening in March, the indicator contributes to signs that companies may continue to curb output and hiring.

The eurozone economy probably "suffered further contraction in the first quarter of 2012", said Howard Archer, chief European economist at IHS Global Insight in London. "This would put the eurozone back into recession."

A gauge of euro-region manufacturing fell to 47.7 in March from 49 in February, Markit said earlier this week. A measure of services rose to 49.2 from 48.8.

The eurozone economy may shrink 0.3 percent this year before returning to growth in 2013, the European Commission said on Feb 23. The economies of Belgium, Greece, Spain, Italy, Cyprus, the Netherlands and Portugal are all seen contracting in 2012, according to the Brussels-based commission.

Adding to signs of a deepening slump, eurozone unemployment jumped to 10.8 percent in February, the highest in more than 14 years, and industrial orders dropped the most in four months in January.

Eurozone retail sales declined in February, led by Germany, as rising oil prices and government budget cuts prompted consumers to pare spending.

Sales fell 0.1 percent from January, when they rose a revised 1.1 percent, the European Union's statistics office in Luxembourg said on Wednesday. Economists had forecast a drop of 0.2 percent, the median of 22 estimates in a Bloomberg News survey showed. Sales declined 2.1 percent from a year earlier.

In Germany, Europe's largest economy, retail sales fell 1.1 percent from January, when they slipped 1.2 percent, Wednesday's report showed. Sales in France rose 1.2 percent.

Michael Diekmann, chief executive officer at Allianz SE, Europe's largest insurer, wrote in a letter to shareholders published on March 23 that he expects 2012 to be "no less challenging" than last year. Schaeffler AG, the world's second-biggest maker of roller bearings, last month forecast slower sales growth in 2012 as European markets weaken.

Bloomberg News in Zurich