Eurozone Services Show Recession Symptoms for Economy

Europe's service sector, the most important driver of the region's economy, may have slid back into recession in March, a signal that the world's second-biggest trading block may struggle to avoid a similar fate.

A second reading of the the Markit Purchasing Managers' Index (PMI) for March was measured at 49.1, a mild improvement from the first tally but still down from February and firmly below 50 - the level at which most economists say marks the difference between expansion and contraction.

"A slight easing in the rate of decline of the Eurozone service sector was insufficient to offset the first decline in manufacturing output for three months, causing the overall economy to contract again in March," said Markit Economist Chris Williamson. "The downturn is currently only very mild, however, with gross domestic product probably falling by just 0.2% in the first quarter. Furthermore, with business confidence in the service sector running at a far higher level than late last year, the recession may also be brief."

The forward looking portion of the survey, however, suggested business leaders were gaining some optimism about the fate of the broader economy. Business expectations for the services sector were measured at an eight month high of 60.6

In a separate report published today, "No Fast Lane Out Of Europe's Recession", the ratings company Standard & Poor's said the eurozone will likely struggle to avoid recession until the autumn, when strengthening demand from emerging markets and better consumer spending in Europe will help boost growth for the full year.

"Germany and other core northern countries of the eurozone should see sluggish GDP growth this year, while their southern neighbors--namely Italy, Spain, and Portugal--are likely to experience a genuine recession," said Jean-Michel Six, Standard & Poor's EMEA chief economist.

Shares around Europe fell following the reports, with the broadest measure of equity performance, the FTSE Eurofirst 300, down 0.6 percent in early European trading.

Bond yields were also on the rise, particularly those of the indebeted nation's inside the single currency. Spain's benchmark 10-year bond prices fell, lifting its borrowing costs by around 7 basis points to 5.3 percent. A basis point is 0.01 percent. Bond prices and bond yields move in inverse direction.

Spain, whose services sector contracted again this month, is unlikely to avoid a technical recession as it struggles to reduce it budget deficit and tame the region's highest unemployment rate. It will auction medium term notes, maturing between 2015 and 2020, later Wednesday.