Economic Decline in Europe Worsens

Douglas A. McIntyre

Just when it seemed that the economic data from the European Union could not get worse, new service sector purchasing managers index (PMI) information from Markit shows that the collapse in most countries in the region has accelerated. Even Germany did not dodge the fallout.

The data will open the debate, which now occurs daily, about whether austerity actually closes national deficits or widens them as lack of stimulus pushes gross domestic products into negative territory.

Recall, a PMI measurement of less than 50 signals contraction.

According to Markit:

At 46.5 in March, the final Markit Eurozone PMI Composite Output Index was unchanged on the flash reading, confirming that the rate of decline in activity accelerated for the second month in a row to reach the fastest since last November.

The PMI shows that output has fallen in each of the past 19 months with the sole exception of a marginal increase at the start of last year.

Of the four largest euro nations, France saw the steepest downturn with output falling at the fastest rate for four years, while severe contractions were again recorded in Spain and Italy (albeit with the latter showing a marginal easing in the rate of decline). Only Germany continued to see higher business activity, though even there the rate of expansion slowed sharply to near-stagnation.