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The latest Purchasing Manager Index (PMI) for the two largest economies, Germany and France, is showing a clear sign of looming recession.

The Composite PMI for France falls to 48.7 in March, below the 50 mark that separates expansion from contraction. It is a 1.7 point decrease compared to the February reading of 50.4, and well below the 50.7 forecast by analysts in the Reuters poll.

The moderate contraction in France was driven by declines in both the manufacturing and service sectors. Goods producers saw output fall at the fastest pace since December. Meanwhile, service providers recorded a modest downturn in business activity after a fractional recovery in February, as the Services Activity Index fall from 50.2 in February to 48.7 in March.

While Germany’s Composite PMI is still above 50 in March with a reading of 51.5, the Manufacturing PMI dropped to 44.7 and reach a 79 month low. The drop from 47.6 recorded in February is also way off from the market expectation of 48, according to analysts in the Reuters poll.

| FT – German factory sector contraction accelerates sharply — PMI |

The index has now fallen in 14 of the past 15 months, down from a record high of 63.3 at the end of 2017, with each of the index’s sub-components imparting a negative influence since the previous survey, according to Markit.

The silver lining is that the rate of increase in services sector business activity remained strong, the Services PMI at 54.9, eased only slightly from February’s five-month high of 55.3.

ECB has already reduced substantially reduced the Real GDP growth for 2019 after the March meeting, from 1.7% forecasted in the December meeting to only 1.1%, citing “a less favourable assessment of the short-term outlook, reflecting a more lasting adverse impact of specific factors in some euro area countries and heightened global policy uncertainties.”

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