Eurozone Economic Downturn Continues In November

Eurozone private sector business activity continued to decline at a solid pace in November, suggesting the recession is deepening in the final months of 2012, a survey by Markit Economics revealed Thursday.

The deterioration was led by the service sector that saw its steepest fall in activity in 40 months. On the other hand, the pace of decline in manufacturing in November was the mildest in eight months.

The seasonally adjusted composite output index, which measures the performance of the manufacturing sector and the service sectors, was little changed at 45.8 in November compared to 45.7 last month.

Economists had expected the reading to remain steady at the October level, which was the lowest since June 2009. An index reading below 50 indicates contraction of the sector.

The PMI data suggests that "the downturn is set to gather pace significantly in the fourth quarter," said Markit's Chief Economist Chris Williamson.

The slight rise in the PMI clearly "does nothing to alter our view that the recession has intensified in Q4", Ben May at Capital Economics said. If the debt crisis worsens over the coming months, rather worse may be to come next year, the economist added.

Private sector activity has now fallen in 14 of the last 15 months, with the exception being a marginal increase seen in January, Markit said.

The purchasing managers' index for the manufacturing sector advanced to an eight-month high of 46.2 in November from 45.4 in October. Economists were looking for a more modest increase to 45.6.

At the same time, the service sector business activity index dropped to a 40-month low of 45.7 from 46 in the previous month, while economists had expected the index to remain unchanged.

Output fell sharply in both manufacturing and services. While the manufacturing sector saw the rate of contraction easing slightly, services suffered a fall in business activity at a rate not seen since July 2009.

According to the survey report, the ongoing drop in overall output reflected a further steep deterioration in new business, which fell at one of the fastest rates seen since mid-2009. A sharper rate of decline in the services sector was partly offset by manufacturers reporting a slowdown in the pace of decline in new orders.

The rates of decline in output eased in both France and Germany but remained substantial, notably in France. Outside Germany and France, the average rate of decline in Eurozone private sector activity accelerated at the fastest pace since July.

Employment fell across the region for the eleventh successive month, with the rate of job losses running at the second-fastest since January 2010, Markit said.

The Eurozone economy slid into recession in the third quarter with the gross domestic product falling 0.1 percent, following a 0.2 percent drop in the second quarter.

In its Autumn Forecast released this month, the European Commission expects the euro area economy to come to a standstill next year as domestic demand is likely to remain weak amid high unemployment.

The commission slashed its 2013 growth forecast for the 17-nation economy to just 0.1 percent from the 1 percent projected earlier this year. In 2012, the economy is estimated to shrink 0.4 percent.