France drags on eurozone economy, Britain brighter

LONDON - Reuters

The eurozone’s economic decline dragged on unabated in March, marked by a huge drop in French business activity. AP photo

A huge drop in French business activity meant the euro zone’s recession dragged on in March but British services firms provided a rare glimpse of economic sunshine, posting their best month since August.

Business surveys yesterday showed the decline in French services businesses is now at its steepest since the nadir of the 2008-09 recession, outstripping even the downturns of struggling Spain and Italy.

In Germany, the region’s biggest and most resilient economy, growth slowed to a near-stall last month.

Unusually, Britain bucked the trend after rising new orders helped services companies like banks, hotels and restaurants record their fastest growth since last summer’s London Olympics.

Overall though, the latest batch of purchasing managers indexes (PMIs) showed most of Europe’s major economies, at least in the euro zone, fared poorly in the first quarter of the year.

Despite the clear economic weakness, economists did not expect the European Central Bank to announce any major easing of monetary policy yesterday.

But the accumulation of dismal data could prompt a more dovish tone from ECB President Mario Draghi, who in January identified “positive contagion” sweeping through financial markets as a result of his policies.

Markit’s Eurozone services PMI fell to 46.4 in March from 47.9 in February. It has spent all but one of the last 20 months rooted below the 50 threshold dividing growth from contraction. It was also down a tick from a preliminary reading of 46.5 reported two weeks ago.

That at least suggested the mishandling of Greek Cyprus’s 10 billion euro bailout at the end of March had no immediate impact on the private economy, survey compiler Markit said.
The dismal French PMI boded ill for the euro zone’s second largest economy for the next quarter at least.

The Markit services purchasing managers’ index fell in March for the eighth month running to 41.3 from 43.7 in February, hitting its lowest level since February 2009.

French consumer spending and budget deficit data March 29 highlighted the enormous task facing the government, which insists it can meet its pledges to revive growth and the public finances.By contrast, the British services PMI added to some early evidence the UK economy could narrowly avoid a third recession in five years.