Dismal figures show that the eurozone remains in dire straits

Economists said the eurozone’s grim outlook is far worse than had been thought. Optimism from this weekend’s deal to boost the International Monetary Fund’s crisis-fighting firepower quickly evaporated. Worried investors sold the euro and bought safe-haven German and US government bonds.

“Today’s dismal PMI figures clearly indicate that the eurozone economy remains in dire straits,” said Martin Van Vliet, senior economist at ING.

“Our base case scenario is still for a gradual return to modestly positive growth in the second half of this year, but with the lingering debt crisis and the ongoing drag from fiscal policy, the risks are clearly skewed to a more protracted recession.”

The Markit PMI (purchasing managers index) fell to 47.9 from 49.2 in March, a five-month low and confounding the forecast for a rise to 49.3.

There is a threshold at 50 that divides growth from contrac- tion.

The eurozone is the biggest export market for Yorkshire companies.

Latest figures show the value of goods exported to the European Union by Yorkshire companies rose by more than a third to £4.4bn, compared with £3.3bn a year earlier, according to the Yorkshire Report 2012 by accountancy firm BDO.

Economist Tom Vosa, at Yorkshire Bank, said: “Hopes that the eurozone recession would prove short-lived with the economy returning to growth in the second quarter were given a reality check by much weaker than expected PMI data for both manufacturing and service sector output.

“The flash estimate for France, Germany and the eurozone showed manufacturing activity contracting a little faster than expected in April.”

European factories had their worst month since June 2009. Companies said their order books were shrinking and they were cutting jobs in reaction to falling demand.

Politics added to the sense of concern. France’s presidential election was thrown wide open by the surprisingly high score of far-right National Front candidate Marine Le Pen in the first round vote while the Dutch government was set to resign in a crisis over budget cuts.

Economists estimate that the eurozone economy shrank 0.2 per cent in the first quarter and will decline 0.1 per cent this quart- er.