Business | Economy
Europe on the brink of another recession
Industry data show weak growth in Germany, France
- Agencies
- Published: 00:00 February 23, 2012
Brussels Euro-zone private sector activity fell back in February after returning to growth in January, a key survey showed Wednesday, stoking concerns that the region is flirting with recession.
Surveys of purchasing managers published yesterday showed unexpectedly weak activity in the region's most powerful economy, Germany, and in France.
This is as well as in the bloc's floundering debtor states, such as Spain, where unemployment is running at 23 per cent, and Greece where the euro debt crisis began more than two years ago and continuous cuts have provoked riots.
Flash PMI
The Markit Eurozone Composite Flash PMI (Purchasing Managers' Index), a good leading indicator of overall economic growth, fell to 49.7 in February from 50.4 last month, below expectations for a rise to 50.6 and under the 50 line that divides growth from contraction.
That weakness was echoed in China, whose PMI showed export orders falling in their worst performance in eight months. Europe is China's biggest export market.
Manufacturing orders
Older data published yesterday, official figures on Eurozone industrial orders for December, showed there had been some stabilisation at low levels.
Manufacturing orders in the 17 countries that share the euro rose 1.9 per cent on the month, beating the 0.7 per cent predicted in a Reuters poll and reversing a 1.1 per cent fall in November.
"The economy remains stuck in low gear," Peter Dixon at Commerzbank said. "It's indicative of a flatlining economy, maybe slightly contracting rather than a major slowdown. It doesn't bode well for the first quarter."
The euro and European shares edged lower yesterday but did not show any strong reaction to the data.
The PMIs showed the Eurozone's two biggest economies, Germany and France, struggling to grow even as the gap between them and the struggling periphery widens.
The Eurozone services PMI fell to 49.4 from January's 50.4, missing even the lowest forecast in a Reuters poll of 44 economists whose predictions centred on a rise to 50.6.
Contraction
"(It) puts a bit of a dent in hopes that the fourth quarter's economic contraction will prove to be a one off," Ben May at Capital Economics said.
The Eurozone economy contracted 0.3 per cent in the dying months of 2011, so a second quarter of contraction would meet the technical definition of recession.
A Reuters poll last week suggested the economy will probably wallow in a relatively mild downturn until the second half of this year.
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