Euro area companies cut prices as recovery loses momentum

Euro area companies cut prices as recovery loses momentum

Deflationary pressures in the euro area intensified in February, raising the pressure on European Central Bank President Mario Draghi to increase stimulus this month.

Markit Economics’ composite Purchasing Managers Index fell to 53 from 53.6 in January. While that’s above the initial estimate, it’s still the lowest in 13 months. Markit’s measure of output prices across manufacturing and services fell further below the key 50 level.

The report pointed to a slowdown across the region, with rates of expansion cooling in Germany, Italy, Spain and Ireland. France fell into contraction for the first time in over a year, Markit said.

“The broad-based disappointment ups the odds of the ECB acting aggressively to avoid another downturn,” said Chris Williamson, an economist at Markit. The slowdown in business activity, slower hiring and price declines “suggest that the region’s recovery is losing momentum.”

Draghi has said the ECB’s Governing Council will review its stimulus in March as weaker oil prices push the euro region’s inflation rate back below zero. Spain, Italy, and France reduced selling prices for goods and services last month, Markit said.


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