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Eurozone Faces Protracted Recession, Survey Shows

March 21, 2013

A sharp slump in a key eurozone economic sentiment survey in March has dashed hopes of an early end to the recession gripping the 17-member currency bloc.

The London-based research group Markit said its closely watched Purchasing Managers' Index (PMI) for the region's manufacturing and service sectors posted a surprise fall, tumbling from 47.9 points in February to a four-month low of 46.5 this month.

A reading in the index of below 50 points marks out to a contraction. Analysts had expected the index would rise to 48.2 in March.

"Instead of the eurozone economy stabilising in the second quarter, as many - including the European Central Bank - have been hoping to see, the downturn could intensify in coming months," said Markit's chief economist Chris Williamson.

"The deteriorating situation in Cyprus also raises the prospect of business and consumer confidence falling further across the single currency area, and possibly dragging the PMI numbers down further in April," he said.

Helping to lead the fall this month was a steep decline in the PMI for France.

The reading for the eurozone's second biggest economy dropped from 43.1 to a four-year low of 42.1.

Williamson sees the currency bloc's economy as possibly contracting by 0.3 per cent during the first quarter after it shrunk by 0.6 per cent during the last three months of 2012.

This was despite the PMI for the currency bloc's biggest economy, Germany, remaining in expansion territory at 51.0 this month.

Markit does not provide a breakdown for other eurozone nations, including the so-called peripheral nations such as Greece, Portugal, Ireland, Spain, as well as Cyprus, which have been at the centre of the eurozone debt crisis.

But it said average output fell across the rest of the eurozone at the steepest rate since November, with the rate of decline accelerating for the second successive month.

Many analysts still expect a pickup in Germany to help haul the eurozone out of recession later this year.

"But with fiscal austerity, tight credit and high unemployment set to keep most peripheral economies in recession, the path back to growth will likely be slow and bumpy," said ING Bank economist Martin van Vliet.

"Moreover, if the situation surrounding Cyprus spirals out of control the onset of recovery might well be delayed," he said.

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Source: Copyright 2013 dpa Deutsche Presse-Agentur GmbH

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