Thursday, February 21 11:51:46
Hopes the euro zone might emerge from recession soon were dealt a blow today, as surveys showed the downturn in the region's businesses worsened unexpectedly this month - especially in France.
Economists had expected that Thursday's 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.
PMI compiler Markit said the schism between Germany and France - the two biggest economies in the euro zone - is now at its widest since the survey started in 1998.
While firms in Germany sustained a healthy rate of growth, French services companies are in the midst of their worst slump since the nadir of the Great Recession in early 2009.
"If it wasn't for Germany, these would be really dire readings. At least the German economy is still helping to keep the euro zone afloat in some respects," said Chris Williamson, chief economist at Markit.
He said the latest PMIs pointed to the euro zone economy shrinking 0.2-0.3 percent in the first quarter, following an estimated 0.4 percent contraction at the end of last year.
That's gloomier than last week's Reuters poll of economists, which suggested the economy will merely stagnate this quarter.
By far the most worrying aspect of Thursday's PMIs was the dismal performance of French companies.
Williamson said the data for France were more befitting of a struggling "peripheral" euro zone economy like Spain or Italy, rather than the "core" status it traditionally shares with Germany. Reuters