Euro zone Oct private sector slump flags recession

Fri Nov 4, 2011 6:50am EDT
 
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Anooja Debnath

LONDON (Reuters) - Private sector activity in the euro zone shrank at its fastest pace in 28 months in October as the debt crisis sapped new business and soured sentiment in an economy looking like it is heading into a slump, survey data showed on Friday.

Markit's composite Purchasing Managers' Index for the single currency area sank to 46.5, down from 49.1 in September and below an earlier flash estimate of 47.2.

"(This) is the kind of level which frankly is pointing to recession," said Peter Dixon, economist at Commerzbank.

"We knew it would it bad but clearly the fact it deteriorated more rapidly than we anticipated indicates the economy is losing momentum at a faster pace. Obviously the euro zone debt crisis is leaving its imprint on the real economy."

The unresolved crisis, which has hammered businesses across the euro zone, has entered a dangerous new phase with Greek Prime Minister George Papandreou facing a tight confidence vote later on Friday after his risky plan for a referendum on an EU/IMF bailout backfired spectacularly.

In a bid to support the ailing economy, the European Central Bank (ECB) surprised markets with a 25 basis point cut on Thursday at its first policy meeting led by Mario Draghi. Economists gave a 50-50 chance of another cut in December, according to a Reuters poll.

SERVICES SLUMP

Markit's Services PMI also fell sharply, to 46.4 in October from 48.8 in September, its lowest reading since July 2009 and again markedly lower than an earlier flash reading of 47.2.   Continued...