Euro area private sector activity remained weak during April as demand declined further and the worrying trend is likely to intensify in the coming months, adding pressure on the European Central Bank to take steps to support the economy, results of a survey showed Tuesday.
The composite output index, which measures both manufacturing and service activity, stayed unchanged at 46.5 in April, initial estimates released by Markit Economics showed, defying economists' expectations for a decline to 46.3.
A score below 50 suggests contraction in the activity. The index has remained in the contraction territory for the nineteenth time in the past twenty months.
Activity in the manufacturing sector declined at the fastest pace in four months in April and at a faster rate than expected by economists, as operating conditions in major member states continued to deteriorate.
The seasonally adjusted manufacturing purchasing managers' index (PMI) dropped to 46.5 in April from 46.8 in March, and stayed below the no-change 50 mark that separates growth from contraction. The latest figure indicated the sharpest fall in activity in four months.
The sub-indicator that measures production at Eurozone factories dropped to 46.3 in April from 46.7 in the previous month, suggesting a faster decrease in output. The slump in production reflected a sharp fall in new business received by goods producers.
The index that gauges the performance of the service sector moved up to 46.6 in April from 46.4, indicating a further slump in activity, though at a weaker rate than in the previous month. The services PMI was forecast to rise to 46.5.
The survey revealed divergent trends in the region's two largest member states named Germany and France. In Germany, both business activity and new business decreased at the steepest rates in six months.
In France, meanwhile, the rate of decline in business activity eased sharply to a four-month low, with new business wins falling at the weakest pace in eight months.
Elsewhere in the currency bloc, output fell at the slowest rate in three months in April, though the rate of loss of new business remained marked.
The survey points to a 0.4 percent GDP contraction in the first quarter, with signs of downside risks. The faster drop in new business suggests that activity and employment could fall at steeper rates in May, Markit Economics Chief Economist Chris Williamson said.
"Policymakers will at least be relieved to see inflationary pressures cooling, which could further open the door to renewed policy stimulus," Williamson added.
The European Central Bank resisted policy easing in April due to concerns over falling bank lending, despite clear signals that the 17-nation economy remained stuck in recession during the first quarter.
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