LONDON (Reuters) – Euro zone business activity took a surprisingly sharp turn for the worse this month as the bloc’s dominant services industry contracted and manufacturing sank deeper into recession, a survey showed on Friday.
HCOB’s preliminary composite euro zone Purchasing Managers’ Index, compiled by S&P Global, sank to a 10-month low of 48.1 in November, below the 50 mark separating growth from contraction.
A Reuters poll had predicted no change from October’s 50.0.
“Things could hardly have turned out much worse,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. “The euro zone’s manufacturing sector is sinking deeper into recession, and now the services sector is starting to struggle after two months of marginal growth.”
The composite new business index fell to 46.6 from 47.9, its lowest reading this year, suggesting no imminent improvement.
A PMI covering services, which had been offsetting the decline among manufacturers, fell to a 10-month low of 49.2 from 51.6. The poll forecast was for no change.
Firms did increase headcount again but were less optimistic about the year ahead. The business expectations index fell to a two-year low of 55.0 from 59.9.
The manufacturing PMI index fell to 45.2 from 46.0, confounding expectations for no change.
An index measuring output, which feeds into the composite PMI, dropped to 45.1 from 45.8. That was despite factories cutting their charges for a third month and at a steeper pace than in October. The output prices index dropped to 47.9 from 48.2.
The drop is likely to cement expectations the European Central Bank will cut interest rates again next month. The bank has cut rates three times this year to 3.25% amid increasing concerns about the bloc’s lacklustre growth outlook.
(Reporting by Jonathan Cable; Editing by Christina Fincher)
