Eurozone private sector downturn worsens: survey

Eurozone private sector activity suffered its worst monthly slide in nearly three years in May, a survey showed Thursday, which analysts said indicates it is locked in a dismal downturn.

The flash Purchasing Managers Index (PMI) compiled by the London-based research firm Markit fell to 45.9 points in May, down from 46.7 in April in what amounted to the fastest rate of decline since June 2009.

Any score below 50 indicates economic contraction, with the May reading of the closely-watched survey of buying activity showing with recession around the debt-laden eurozone periphery clearly now eating into the core.

May's data was affected by a "marginal fall" across combined manufacturing and services output in euro powerhouse Germany -- only the second fall there in 34 months.

The data coincided with the Ifo economic institute's keenly-awaited German business climate index, which dropped to 106.9 points in May from 109.9 points in April.

In number two economy France, the rate of decline in activity accelerated to the fastest rate since April 2009.

Markit chief economist Chris Williamson said the results were "broadly consistent with gross domestic product falling by at least 0.5 percent across the region in the second quarter" of the year, adding that "even Germany is at risk of GDP falling slightly."

London-based IHS Global Insight analyst Howard Archer said the results, the morning after an EU summit overshadowed by worries over Greece's future in the eurozone and investor flight from Spain and Italy, were "truly dismal," with the only "redeeming feature" being an easing of inflation.

"There still seems a reluctance within the European Central Bank to take interest rates below 1.0 percent, but the case to do so will become ever more compelling if eurozone economic activity does not show any sign of improvement in the near term," he added.

Jennifer McKeown of Capital Economics also said the results "paint a dismal picture" and "suggest that the downturn has now really hit Germany."

In all, she said "a deepening and spreading economic downturn will only add to the eurozone's woes and looks set to put further downward pressure on the euro exchange rate."

"If anything, risks are that the recession is deeper than we currently envisage," added Marie Diron of Ernst & Young.

She said the figures "add to the urgency of eurozone leaders agreeing on significant measures very quickly" to stem the spillover effects of the debt crisis on the real economy.

With time seemingly "running out," she stressed that "it is imperative to restore confidence in the eurozone's banking sector in order to enable banks to carry out their essential task of lending money to businesses and households."

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