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Weak data fuel deflation fears in eurozone
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An expected acceleration in eurozone business activity failed to materialize this month and firms cut prices again to drum up trade, which may further stoke fears of deflation in the currency bloc, surveys showed.
Still, the 18-member currency bloc’s recovery appears fairly broad-based, with growth across private industry near 2-1/2 year highs.
“The big picture is one of a region that is recovering. It is not a spectacular recovery, but it is certainly moving in the right direction with a couple of exceptions — notably France,” said Chris Williamson, Markit’s chief economist.
“The periphery has pulled out of its recession and Germany is positively surging,” he said.
Markit’s Composite Purchasing Managers’ Index, which is based on surveys of thousands of companies and is seen as a good guide to growth, dipped to 52.7, just below January’s 31-month high of 52.9.
That missed expectations in a Reuters poll for a rise to 53.1 but marked the eighth month the index has been above the 50 level that divides growth from contraction.
Williamson said the latest data point to 0.5 percent economic growth this quarter, stronger than the 0.3 percent predicted in a Reuters poll published last week.
Germany’s composite PMI rose to a 32-month high of 56.1 but in France the index fell to 47.6, languishing below the break-even level for the third month.
A PMI covering the region’s dominant service sector nudged up to 51.7 from January’s 51.6, weaker than an expected rise to 51.9. The manufacturing PMI fell to 53.0 from 54.0, below all expectations in a Reuters poll of 37 economists.
The manufacturing output index, which feeds into the composite PMI, fell to 55.5 from January’s 33-month high of 56.7.
Worryingly for policy-makers, the survey suggested inflation wasn’t going up anytime soon — a composite prices-charged index nudged higher to 49.4 from 49.2 but in holding firmly below 50 showed firms have cut prices every month for nearly two years.
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