The question of whether the eurozone has slipped back into recession has been answered. Data from Markit show that “Eurozone business activity slips back into contraction in February.” The Composite Outlook Index, Services PMI Activity Index and Eurozone Manufacturing PMI came in at 49.4, 49.7, and 49 — all below the critical 50 level. That level marks the difference between growth and contraction.

Chris Williamson, Chief Economist at Markit, said:

A retreat back below the 50.0 no-change level for the Eurozone PMI is a disappointment, and highlights the ongoing risk that the region may be sliding back into recession. Although business conditions are showing signs of stabilising so far this year, which represents a marked improvement on the widespread deepening gloom seen late last year, the Eurozone is by no means out of the woods. Demand needs to improve considerably in coming months before we can safely say that the region will return to anything like reasonable growth.

A great deal of evidence shows that the economic situation in the region will not improve soon. Italy, Spain, Portugal and Greece are admittedly in recessions. By some measures so is Germany. Unemployment is at historic highs in many nations — above 20% in both Spain and Greece. Demand within the region will not pick up. The economically weakest nations are not good markets for exports from stronger economies like Germany’s. That leaves demand from outside the region as the key to any GDP expansion within it. But the balance of the world is still not much beyond the old recession’s tipping point.

The eurozone economic indicators were troubling for February, and that is not likely to get better soon.

Douglas A. McIntyre

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