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Eurozone private sector activity is set to face the sharpest quarterly contraction since the global financial crisis in 2009, according to a closely watched industry survey.
Business activity in the 17-country bloc contracted for the 14th month out of 15 in November, as the manufacturing and service sectors continued to decline in Europe’s largest economies.
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The Markit composite index for the euro area inched higher to 45.8 from 45.7 in October, still far below the 50 mark, which indicates a contraction in activity.
“The eurozone economy continued to deteriorate at an alarming pace in November, and is entrenched in the steepest downturn since mid-2009,” said Chris Williamson, economist at Markit, which compiled the data.
The eurozone fell back into recession for the first time in three years in the third quarter of 2012, with the gross domestic product contracting 0.1 per cent.
However, Mr Williamson said that the latest private sector activity data suggested the downturn was set to gather further pace in the fourth quarter. “The final three months of the year could see GDP fall by as much as 0.5 per cent,” he said.
The eurozone’s services sector, which includes banking and insurance, suffered the worst contraction in more than three years. Markit painted a bleak outlook, as companies expect a drop in demand similar to the one experienced in March 2009, the darkest month of the financial crisis.
Business activity in Germany, Europe’s largest economy, declined at a slower rate than the previous month but remained weak. German composite PMI increased to 47.9 in November from 47.7 in October but the services sector dropped from 48.4 to 48, as new orders fell.
Meanwhile, France remained in deep negative territory in November despite a small improvement in its PMI, up to 44.6 compared to 43.5 the previous month.
Howard Archer, economist at IHS Global Insight, said that given the worsening data the European Central Bank may be forced to cut interest rates in December to stimulate the bloc’s economy.
“With the eurozone seemingly headed for further and deeper GDP contraction in the fourth quarter after moving officially into recession in the third, and with the underlying inflation situation in the single currency area looking far from alarming, we believe that the ECB will take interest rates down from 0.75% to 0.50% sooner rather than later,” said Mr Archer.
