Euro zone services and manufacturing business activity sank much further and faster than expected in November to record lows, pushing some economists to call for larger rate cuts from the European Central Bank.
A key survey of euro zone businesses published today also showed that inflationary pressures are fading fast, making it easier for the ECB to cut rates further, as is widely expected by markets and economists.
The Markit Eurozone Purchasing Managers Index for services companies ranging from banks to restaurants fell to 43.3 in November from 45.8 the previous month, the lowest in the survey's 10-year history. That is well below the 50.0 mark that divides growth from contraction and some way lower than economists' predictions of 45.0.
Manufacturing is being hit even harder than the services sector, which accounts for most of the euro zone's economy. The manufacturing PMI tumbled to a record low of 36.2 in November from 41.1 in October, again much lower than the 40.5 forecast by economists.
But financial markets and the euro were largely unaffected by the data.
Export orders and overall orders both fell at the fastest pace on record, showing that the global financial crisis which began over a year ago is steadily eroding households' and companies' ability to keep spending.
Earlier data showed the euro zone's exporting powerhouse, Germany, recording a record low on the PMI measure of manufacturing activity, while in France both the manufacturing and services sectors showed record weakness.
"One word: terrible. The services side we had expected, but manufacturing is a shocker, it has really fallen a long way," said Dominic Bryant at BNP Paribas.
This demands further action by the ECB, which has lowered interest rates by 50 basis points twice since last month to 3.25 per cent.
"We already have a 75 basis point cut priced in from the ECB in December with a trough of 1 percent in the first half of next year. Arguably on this data it should be a 100 basis point cut. We would not argue against it," Bryant added.
Data provider Markit said the PMI levels had been badly affected by the financial crisis. "Various sectors are struggling, but this is broad based: companies are really struggling to see demand," said Chris Williamson, chief euro area economist at Markit.
The combined falls sent the composite PMI index, covering manufacturing and services, tumbling to a record low of 39.7 in November from 43.6 in October.
Reuters