THE risk of a Europe-wide recession increased today after dire news from the European Union’s main growth engines, Germany and France.
An “entrenched” downturn in Germany’s powerhouse manufacturing sector has pushed the pace of expansion in Europe’s biggest economy to the lowest since 2012, according to financial data firm IHS Markit’s snapshot. France’s private sector was in contraction territory as orders for both manufacturers and services firms flagged.
The euro slid more than a cent against the pound as markets reacted to the poor data, which comes after German Chancellor Angela Merkel recently avoided a technical recession by the skin of her teeth in the second half of last year. The overall eurozone is barely in growth territory after sliding to 51.3 in early March, closer to the 50 no-change mark.
IHS Markit’s chief business economist Chris Williamson said: “Any such further loss of growth momentum in the second quarter compared with the 0.2% GDP rise signalled for the first three months of the year would raise doubts on the economy’s ability to grow by more than 1% this year.”
Earlier this month, the darkening economic stormclouds — exacerbated by Brexit fears and the trade row between the US and China — forced the European Central Bank to change course. It pushed out the timing of interest rate hikes until next year at the earliest and offering banks a new round of cheap loans to help revive the eurozone. The US Federal Reserve has also taken a newly cautious approach, damping the prospect of further interest rate rises this year.
ING economist Bert Colijn said the figures showed “little hope of growth recovery in the first quarter”.
He said: “To fire on both cylinders again, the eurozone seems to require the global growth outlook to improve. Unfortunately, uncertainty is continuing into April.”