Eurozone downturn deepens
The eurozone is not only staying in recession, but the overall outlook is getting worse, according to new data.
Markit's Composite Purchasing Managers' Index for February showed a deterioration since January, with the Output Index dropping from 48.6 to 47.9. Markit noted that the one silver lining to the grey cloud was that the rate of decline was slower than in the nine months prior to January. However, that could mean that March will bring confirmation of a genuinely worsening trend.
As ever, the eurozone economy is not a whole, with some countries doing better individually than others. For example, Germany's PMI was 53.3 and Ireland's 52.8 - albeit two and six-month lows respectively. The usual suspects in southern Europe continued to do particularly badly, such as Spain (45.3) and Italy (44.4), while the worst aspect of the situation may be France's reading of 43.1.
Chief economist Chris Williamson said: "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 added that the situation on the periphery is also "deteriorating", with Spain and Italy doing worse and the latter facing more uncertainty after the recent inconclusive general election.
The upshot, according to the economist, is that the eurozone's recovery depends heavily on Germany, but he suggested it is a "tall order" for this to offset the decline elsewhere, meaning the eurozone is likely to continue sliding until July 2013.
One curious development may help. Many Britons would argue the crisis has provided ample evidence of the wisdom of retaining sterling, but Latvia, which needed a big bailout after a huge recession, has now applied to become the 18th member of the eurozone.
With the country's economy now growing again, this could make at least a small positive contribution towards the whole, albeit one that will always be dwarfed by the much larger countries in the bloc.
What may be of greater significance, however, is that it shows a lot of faith in the single currency project. It may be the Latvian government is making an error, but the decision cannot harm the euro in the meantime.