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Eurozone Private Sector Logs Bigger-Than-Expected Fall In April


Eurozone private sector contracted at a faster-than-expected pace to a 5-month low in April, indicating a sharp deceleration in economic activity at the start of the second quarter.

The composite output index that measures performance of both manufacturing and services dropped unexpectedly to 47.4 in April from 49.1 in March, a flash estimate published by Markit Economics showed Monday.

Economists had forecast the reading to rise to 49.3. A reading below 50 suggests contraction in the private sector.

The services Purchasing Managers' Index fell to 47.9 from 49.2 in March. Likewise, the manufacturing PMI dropped to 46.0 from 47. The services PMI was forecast to rise to 49.3 and the manufacturing index to 48.1.

Markit Chief Economist Chris Williamson said, "The flash PMI signalled a faster rate of economic contraction in the Eurozone during April, extending what appears to be a double-dip recession into a third consecutive quarter."

Output has fallen seven times in the past eight months. Growth eased to a very modest pace in Germany, to a level close to stagnation. The German composite output index fell to a five-month low of 50.9 in April from 51.6 in March.

Hurt mainly by the contraction in the services sector, French private sector activity declined to a six-month low in April. The composite indicator came in at 46.8, down from 48.7 in March.

Nonetheless, the big-two euro countries continued to outperform the rest of the region where output fell sharply. Steep declines in both manufacturing output and services activity were seen in the periphery.

Incoming new business in the 17-nation bloc dipped for the ninth month in a row, registering the steepest decline since October.

Consequently, backlogs of work dropped across the region for the tenth successive month. With the deteriorating pipeline of work, companies reduced their staffing levels for the fourth month.

Prices charged by companies decreased marginally for the sixth time in the past eight months and input price inflation eased to a three-month low.

With price pressures easing, the PMI survey suggests that policymakers will worry about growth rather than inflation in coming months, said Williamson.

Purchasing managers' surveys put real pressure on the European Central Bank to take interest rates lower, IHS Global Insight's Chief European Economist Howard Archer said. The bank should be fully prepared to trim interest rates further if Eurozone economic activity does not show any sign of improvement in the near term, he added.

by RTTNews Staff Writer

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