Eurozone business contraction eases

Business activity in the 16 countries sharing the euro contracted less sharply in March than in February, though it remained at depressed levels, according to a new survey.

The eurozone's purchasing managers' index, compiled by data and research group Markit, rose to 38.3 points from 36.2 points in February, up on an early estimate for the month.

The figure was also higher than the 37.6 predicted by economists polled by Dow Jones Newswires.

However, while the points rise was the largest since October 2003, the base is low and the March rate of business contraction was the same as that seen in January.

The upward revision "marginally boosts hopes that the rate of contraction could be starting to moderate," said Howard Archer, chief European economist at HS Global Insight.

However, the report "does little to alleviate the pressure on the European Central Bank to trim interest rates further in May and announce significant non-conventional measures."

Analysts believe this would be most likely to manifest itself through extending loan periods from six months to a year. The ECB could also broaden the range of collateral it accepts for loans.

The outcome marked the tenth month in a row that the PMI index had come in below the key 50-point threshold that indicates contracting activity in the private sector as the European economies endure a deep recession.

Such figures have pushed up unemployment in the 16 countries using the euro to 8.5 per cent in February, the highest level in close to three years.

The separate PMI index for the eurozone's vast service sector also gained some ground, rising to 40.1 points from 39.2 in February.

Manufacturing activity in the eurozone also contracted in March although again not as quickly as in February, rising to 33.9 points from 33.5 in February, according to figures announced separately last Wednesday.