October PMIs suggest euro zone downturn deepening

Wed Oct 24, 2012 4:19am EDT
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By Jonathan Cable

LONDON (Reuters) - Euro zone businesses in October suffered their worst month since the bloc emerged from its last recession more than three years ago, forcing them to cut more jobs to reduce costs, surveys showed on Wednesday.

The downturn that began in smaller periphery countries is now gripping Germany and France, dragging the euro zone as a whole deeper into the quagmire.

Markit's Composite Purchasing Managers' Index (PMI), which polls around 5,000 businesses across the 17-nation bloc and is viewed as a reliable growth indicator, fell to 45.8 this month from a September reading of 46.1.

It is the lowest reading since June 2009 and confounded consensus expectations in a Reuters poll for a rise to 46.4. The index has now been below the 50 mark that separates growth from contraction since February.

"It's very disappointing, it's a depressing scenario as things are getting worse," said Chris Williamson, chief economist at data collator Markit.

"We are more downbeat than the official data. The PMIs are running at levels in the third quarter and start of the fourth quarter historically consistent with GDP falling at about 0.6 percent."

Williamson said while the official data implied a more modest decline of 0.2-0.3 percent in the third quarter, the PMIs suggested the downturn would accelerate into the current quarter, a far gloomier outlook than the stagnation predicted by a Reuters poll last week. <ECILT/EU>

The economy contracted 0.2 percent in the second quarter and is predicted to have shrunk 0.3 percent in the third, meeting the technical definition of a recession.   Continued...

A woman checks job offers in downtown Milan April 3, 2012. REUTERS/Alessandro Garofalo