Eurozone private sector drops, signalling recession: PMI

(BRUSSELS) - Eurozone private sector activity retreated in March, providing new evidence that the 17-nation single currency area is in recession, a key survey showed on Wednesday.

The composite Purchasing Managers Index (PMI) compiled by Markit research firm hit a three-month low, dropping to 49.1 points in March compared to 49.3 in February. A score below the neutral 50-point mark indicates contraction.

The result, however, was better than a previous estimate of 48.7 points and indicates a "mild" contraction, Markit said, publishing the results of its survey which is closely watched as a leading indicator of the trend of activity.

"With the exception of a marginal expansion seen in January, the economy has been in continual decline since last September," said Markit chief economist Chris Williamson.

"Although the average rate of decline seen over the first quarter eased compared with the final three months of last year, the survey data nevertheless indicate that the region has slipped back into a technical recession," he said.

Battling a relentless debt crisis, the eurozone took a first step towards recession when its economy shrank by 0.3 percent in the fourth quarter of 2011. A recession is defined as two consecutive months of economic contraction.

The PMI, a survey of 4,500 manufacturing and services firms, showed that Service sector business activity dropped for the second month running in March, while manufacturing output shrank for the first time in three months.

The survey also highlighted gaps between eurozone states, with Italy and Spain "firmly" stuck in recession despite slower rates of contraction.

Germany, Europe's economic locomotive, saw growth slow down to a three-month low, Markit said.

France recorded a first contraction for four months while Ireland "was the only bright spot" with the rate of expansion reaching an 11-month high.

"The Eurozone is not out of the woods yet, although the economy has been stabilised," said Christian Schulz, senior economist at Berenberg Bank.

"In the short-term, austerity measures in several important countries are likely to hold back the recovery," he said.