Eurozone businesses started 2014 with their best quarter in three years, but buoyant growth came at a cost as they slashed prices to drum up trade, which could further stoke deflation fears.

The Composite Purchasing Managers’ Index, which compiler Markit said pointed to first-quarter growth of 0.5 per cent, was followed by official data which showed retail sales rose more than expected in February.

If Markit’s estimate is realised, it would beat expectations and mark the fastest pace of growth since early 2011.

The Composite PMI, a broad survey of businesses that is regarded as a good gauge of growth, dipped to 53.1 in March from February’s 32-month high of 53.3, holding above the 50 mark that divides growth from contraction for the ninth month.

The German, French and Spanish service industry PMIs were all solid last month although Italy’s unexpectedly fell back into contraction territory, casting some doubt on the strength of its recovery.

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.