The Markit Eurozone Purchasing Managers Index has highlighted concerns about a renewed downturn in the Eurozone with the publication of the latest flash estimates.

Markit said the ongoing deterioration in the order book pipeline had prompted firms to cut payroll numbers for the sixteenth month running. The rate of job losses accelerated slightly on March, reflecting stronger rates of job shedding in both manufacturing and services.

Activity fell sharply again in both manufacturing and services. While the former saw the steepest rate of decline for four months, the latter saw the downturn ease slightly compared with March. New business fell for the twenty-first successive month, with the rate of deterioration accelerating for the third month in a row to signal the steepest decline since December. Marked falls were seen in both manufacturing and services.

Divergent trends were evident in the region’s two largest member states. While France saw the rates of decline in both business activity and new business ease sharply to the slowest for four and eight months respectively, Germany saw both activity and new business fall at the steepest rates for six months. The drop in German activity was also notable in being the first since last November.

Backlogs of work fell for the twenty-second consecutive month, being depleted at the same rate as March (though still falling less steeply than seen late last year). The ongoing deterioration in the order book pipeline prompted firms to cut payroll numbers for the sixteenth month running. The rate of job losses accelerated slightly on March, reflecting stronger rates of job shedding in both manufacturing and services.

Looking ahead, service sector companies’ expectations about activity levels in the year ahead fell to the lowest for four months. Meanwhile in manufacturing the orders-to-inventory ratio fell to the lowest for six months, suggesting firms may seek to cut production again in May.

Commenting on the flash PMI data, Chris Williamson, Chief Economist at Markit said:

“Although the PMI was unchanged in April, the survey is signalling a worrying weakness in the economy at the start of the second quarter, with signs that the downturn is more likely to intensify further in coming months rather than ease.

“Thanks to an upturn in the survey at the start of the year, the PMI suggests that euro area GDP fell by around 0.2-0.3% in the first quarter after a 0.6% drop at the end of last year. However, the April reading points to a 0.4% rate of decline, with downside risks. Worryingly, the rate of loss of new business gathered further momentum, suggesting that activity and employment could fall at steeper rates in May.

“The renewed decline in Germany will also raise fears that the region’s largest growth engine has moved into reverse, thereby acting as a drag on the region at the same time as particularly steep downturns persist in France, Italy and Spain."