LONDON: The euro zone's manufacturing sector contracted at its fastest pace in two years last month, pushing factories to reduce their labour force, as a downturn in the periphery took hold in the core, a survey showed on Thursday. The survey comes on the heels of a slew of downbeat data as the 17-nation bloc's policymakers struggle to deal with a raging debt crisis that has threatened to bring the common currency crashing down. The Markit Eurozone Manufacturing Purchasing Managers' Index (PMI) fell to 46.4 in November, its lowest level since July 2009, down from October's 47.1. It was in line with a flash reading released last week but notched its fourth consecutive month below the 50 mark that divides growth from contraction. "The final PMI data confirm the downbeat picture from the earlier flash results. It was also the first month since mid-2009 that all countries saw output fall, highlighting the broadening-out of the downturn from the periphery to the core," said Chris Williamson, chief economist at data compiler Markit. Earlier data from Germany, Europe's backbone, showed its manufacturing sector contracted at its fastest pace in over two years while in neighbouring France the index sank to its lowest reading since June 2009. Italian factory activity contracted for the fourth consecutive month while Spain's shrank for the seventh month. The euro zone's output index, which feeds into a broader composite survey due on Monday that is used as a guide to growth, fell to 45.7 from 46.6 in October, its lowest reading since June 2009. The bloc's economy grew a mere 0.2 percent in the third quarter and economists in a Reuters poll gave a 60 percent chance of a recession in the next year. In a bid to boost growth, the European Central Bank will cut interest rates next week and throw more funding lifelines to stressed banks toiling with the euro zone's debt crisis, according to a firm majority of economists polled by Reuters earlier this week. In the face of rapidly sinking new orders firms reduced their headcount for the first time since April 2010 with the employment index falling to 49.9 from October's 50.5. "Manufacturers are now reducing headcounts again, in line with lower sales and the darker economic outlook," Williamson said. Unemployment levels in the 17-nation bloc nudged higher to 10.3 percent in October, official data showed on Wednesday. Input prices fell for the second month running while firms only raised prices marginally, the survey showed, providing some good news for the ECB. Inflation held at 3.0 percent last month, above the ECB's two percent target ceiling.

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