Europe News

Trouble ahead? Euro zone business activity declines further

Business activity in the euro zone hit a 13-month low in February, according to the latest purchasing manager's index from Markit.

The euro zone composite PMI index, which measures activity in the manufacturing and services sector, fell to 52.7 in February from a revised figure of 53.5 in January. The index came in below expectations of 53.3 from analysts polled by Reuters. The 50-point mark separates expansion from contraction.

The second consecutive month of slowdown reflected a "waning in growth of new orders for a third consecutive month, resulting in the smallest rise in new business for 12 months," Markit said.

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Last month, flash data showed that European business activity slowed to its weakest level since February 2015.

Chris Williamson, chief economist at Markit, said that the latest disappointing data "greatly increase the odds of more aggressive stimulus from the ECB (European Central Bank) in March."

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"Not only did the survey indicate the weakest pace of economic growth for just over a year, but deflationary forces intensified. Economic growth is likely to slow below 0.3 percent in the first quarter unless we see a sudden uplift in March, which on the basis of the forward-looking components of the PMI seems unlikely."

"In fact, growth looks more likely to slow further than accelerate," he warned.

"The need to compete on price has become increasingly widespread amid weak demand, leading to an escalation of deflationary pressures that will worry policymakers. As such, the data will further fuel expectations that the ECB will unleash further quantitative easing and deeper negative interest rates at its March meeting."

- By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt. Follow CNBC International on Twitter and Facebook.