Eurozone private sector slips, suggesting recession

(BRUSSELS) - Eurozone private sector activity fell more sharply than expected in March, indicating that the 17-nation single currency area slid back into recession, a key survey showed on Thursday.

Manufacturing output and service sector activity experienced their worst performances in three and four months respectively this month, according to the composite purchasing managers' index (PMI) compiled by Markit research firm.

"The eurozone economy contracted at a faster rate in March, suggesting that the region has fallen back into recession, with output now having fallen in both the final quarter of last year and the first quarter of 2012," said Markit chief economist Chris Williamson.

The downturn, however, is "very mild," with the PMI signalling a contraction of around 0.1 and 0.2 percent.

"An upturn in business confidence in the service sector provides hope that conditions may improve again later in the year," he said.

The PMI, a survey of 4,500 manufacturing and services firms, slowed to 48.7 points in March after reaching 49.3 points in February. Any score below 50 indicates contraction.

Analysts polled by Dow Jones Newswires had forecast a softer contraction in March with a PMI score of 49.6 points.

"The further drop in the PMI is clearly a disappointment following the brief return to growth seen in January, and suggests that policymakers will need to seek ways to revive economic growth across the region again," Williamson said.

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 European Union will publish first quarter growth figures on May 15.