The Eurozone downturn was not as bad as preliminary data had pointed towards, but the slowdown continues despite growth in Germany.

According to data published this morning by Markit, the Eurozone PMI composite output index advanced from the 47.3 flash estimate to settle at 47.9 in February, but still remained below January's reading of 48,6.

Markit notes that the steepening of the downturn in business activity contrasts with the easing trend which had been evident in the three months to January. "However, the rate of decline remained less severe than seen in any of the nine months prior to January," the group added.

On the jobs front, firms continued to cut headcounts for the fourteenth month running, also the rate eased compared to the three-year record registered in the prior month.

Although Markit Chief Economist Chris Williamson commented that the dip in the February data "is a disappointment", he noted that on the bright side it implies a "much smaller" drop in this quarter's GDP than seen in 2012.

Williamson continues to express concern about the divergence in member states. "Worryingly, the divergence between Germany and France so far this year is the widest in the 15-year survey history. Germany is on course to see the strongest quarterly growth since the spring of 2011, but France is contracting at the fastest rate for four years," he said.

Moreover, Williamson expressed concern about the sorry state of the periphery with rates of decline picking up in both Italy and Spain.

"The outlook therefore seems to largely depend on whether Germany can continue to expand and offset the weakness in France, Italy and Spain, which seems a tall order, meaning hopes of a return to growth for the region by mid-2013 are now looking too optimistic," Williamson concluded.

JM

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