Eurozone is in recession

Eurozone businesses floundered in March and growth among Asian firms cooled, but data on Wednesday portrayed a resilient US jobs market last month, underscoring widening fault lines in the global economy. Sagging orders kept eurozone businesses in the doldrums in March, although companies became more confident that better times lie ahead, a survey showed. That contrasted with evidence of a slowdown in India and wilting business confidence. The mediocre data was offset a little by news that the US economy added 209,000 private jobs in March, according to the ADP national employment report. While that fell from 216,000 in February, it comfortably beat the consensus of more than 37 economists for 200,000, pushing an already-weakened euro to a three-week low against the dollar. The jobs report came a day after markets were jolted by news that the US Federal Reserve, while guarded on the clearly brighter economic prospects there, looks far from considering any more stimulus for the world’s largest economy. Given that there are no concrete plans to stimulate growth in debt-ridden Europe, the onus remains firmly on the United States and developing nations such as China and India, which are slowing, to carry world economic growth. Markit’s Eurozone Composite Purchasing Managers Index (PMI) edged down to 49.1 in March from 49.3 in February, slipping further below the 50 mark that divides growth from contraction. In India, a comparable report showed services growth slipped to a five-month low in March as business confidence faded to its weakest since 2009.  — Reuters The HSBC Markit Business Activity index fell sharply to 52.3 in March from 56.5 the previous month. Growth of new business, which had powered the modest rise in activity until now. — Reuters Although that was better than a preliminary reading of 48.7, survey compiler Markit said it probably consigned the eurozone to recession, defined as two consecutive quarters of contraction in gross domestic product. “(It) suggests that the first quarter of 2012 was not as bad as the final quarter of 2011, but the last two months of surveys have been well below the upturn promised in January,” said economists Janet Henry, European economist at HSBC. “The strength of service sector business confidence raises hope for a future recovery.” The services PMI, measuring the fortunes of the services sector was a little less gloomy than originally portrayed, rising to 49.2 from 48.8 in February, a substantial upwards revision from the 48.7 flash reading for March. However, Europe’s problems look far from over. Spanish borrowing costs jumped at a bond auction on Wednesday, jolting wider European markets, as this week’s tough budget failed to calm investors’ nerves about the country’s finances. New business levels continued to shrink and at a faster pace last month, which does not bode well for April, although services firms sounded more upbeat about the future, with business expectations at an eight-month high. “With business confidence in the service sector running at a far higher level than late last year, the recession may also be brief,” said Chris Williamson, Markit’s chief economist. The upturn in businesss expectations coincided with a new tranche of three-year loans given to banks by the European Central Bank in February, worth more than half a trillion euros. But some eurozone countries are clearly doing better than others. Activity held essentially unchanged in France, while it picked up slightly in Germany. And the downturn in Spanish services activity, while still worrying, unexpectedly eased. “The downturn is currently only very mild ... with gross domestic product probably falling by just 0.2 per cent in the first quarter,” said Markit’s Williamson, speaking about overall euro zone growth. That tallies with a Reuters poll of economists taken two weeks ago, which projected the euro zone economy would stagnate in the second quarter. Employment in the services sector fell across the region for a third month, although Germany bucked that trend by posting its best upturn in jobs in the year to date, Markit said. The UK services PMI, by contrast, taken together with manufacturing data earlier this week that also showed a better performance than the euro zone, suggested Britain’s economy expanded by 0.5 percent in the first quarter, Markit said. The Markit/CIPS services survey rose to 55.3 in March, well above 53.8 in February, confounding expectations for a decline to 53.4. In India, a comparable report showed services growth slipped to a five-month low in March as business confidence faded to its weakest since 2009. The HSBC Markit Business Activity index fell sharply to 52.3 in March from 56.5 the previous month. Growth of new business, which had powered the modest rise in activity until now.