The Eurozone had its worst month in over a year in February which, coupled with further signs of deflationary pressures, is likely to solidify expectations for further monetary policy easing, a survey found.
Financial information company Markit said Thursday that its main gauge of business activity across the 19-country single currency bloc — the so-called purchasing managers’ index — slipped to 53.0 points during the month from 53.6 in January. Still the February rate was above the 52.7 initial estimate and remains well above the 50 level that marks the threshold between expansion and contraction.
“The slowdown in growth of business activity, accompanied by a similar easing in the pace of job creation and the steepest fall in prices charged for a year, suggest that the region’s recovery is losing momentum,” said Chris Williamson, chief economist at Markit.
“The broad-based disappointment ups the odds of the European Central Bank acting aggressively to avoid another downturn.”
France, according to Williamson, remains the “weakest link” among the eurozone’s big economies.
An additional cut to the ECB’s deposit rate is almost certain when it next meets on March 10 and a recent Reuters poll gave an even chance the central bank would increase the size of its bond-buying program from 60 billion euro a month.
Prices fell 0.2 % across the bloc last month, nowhere near the ECB’s inflation target of just below 2 %, and Markit’s survey showed firms discounted goods and services at the steepest rate for a year. The output price index fell to 48.5 from 48.9.
With the outlook both within and outside the bloc deteriorating, services firms were less optimistic about the year ahead than they were in January. The business expectations index fell to 63.1 from the previous 65.1, which was the highest since May 2011. (with AP, Reuters)