The PMI fell to 48.7 points in March, after reaching 49.3 points in February, the London-based economic research group Markit's survey of 4,500 eurozone companies showed on Thursday.

A reading below 50 signaled a "contraction" in business activity, Markit chief economist Chris Williamson said, suggesting that the 17-nation currency area "has fallen back into recession" in March.

A recession is defined as two consecutive quarters of negative growth. After the eurozone economy already shrank in the final quarter of last year, Williamson said the Purchasing Managers' Index (PMI) data signaled a contraction of 0.1 for the first quarter of 2012, which was a "very mild" downturn.

However, the PMI for March has shown orders falling at their fastest pace for three months, and companies cutting their workforces for the third consecutive month. In addition, input prices posted their steepest rise since June.

"The further drop in the PMI is clearly a disappointment, and suggests that policymakers will need to seek ways to revive economic growth across the region," Williamson added.

Economic divide

Evidence for a deepening economic divide in the eurozone are Germany's PMI figures, showing the country hovering above the 50-point mark, while many other eurozone members are deep in recession territory.

Although the index for Germany fell from 53.2 points in February to 51.4 in March, it would still mean "economic expansion" of around 0.2 percent.

"Germany and France look to have avoided a return to recession, but only by very narrow margins," Williamson said.

The release of the PMI coincided with a statement made by European Central Bank President Mario Draghi, suggesting the eurozone was recovering from the debt crisis.

"The worst is over," he said in an interview for Germany's mass-circulation "Bild" newspaper Thursday.

"Key indicators such as inflation, the current account balance and above all budget deficits are all better than, say, in the United States," the ECB chief added.

uhe/ai (AFP, dpa, Reuters)