Eurozone manufacturing activity dropped to a three-month low in March, with the malaise spreading to top economies Germany and France, a key survey showed yesterday.
The Purchasing Managers Index (PMI), a survey of 3,000 eurozone manufacturers compiled by the Markit research firm, fell to 47.7 points last month, down from 49 points in February. A score below the 50 mark indicates contraction.
“Eurozone manufacturers suffered a miserable March, with a renewed downturn in production wiping out marginal gains seen in the first two months of the year,” Markit chief economist Chris Williamson said.
“Manufacturing is therefore likely to have acted as a drag on economic growth in the eurozone in the first quarter, falling to a lesser extent than in the final quarter of last year, but nevertheless failing to prevent the economy sliding back into recession,” he said.
The research firm said there were “further signs that the manufacturing malaise already exhibited at the periphery of the currency bloc was spreading to the core.”
Germany’s manufacturing PMI fell to 48.4 points in March, the first time it had dropped below the 50 mark this year. France sank to 46.7 points, the steepest contraction since June 2009.
“Ongoing steep downturns in the periphery are now being accompanied by signs of renewed weakness in countries such as Germany and France,” Williamson said.
A decline in new orders and the rise in oil prices, which weighed on production costs, contributed to the decline in eurozone manufacturing activity, Markit said.
Analysts widely believe the eurozone entered recession this year after the economy shrank by 0.3 percent in the last quarter of last year. A recession is defined as two consecutive months of economic contraction.
“France’s manufacturing sector and the higher oil price delayed a manufacturing recovery in Europe,” Berenberg Bank senior economist Christian Schulz said.
“Fiscal austerity and the financial crisis also continue to weigh on many southern European countries and on the export-dependent manufacturing sector elsewhere,” he added.