LONDON- 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.
“The November PMI is another wake-up call for euro zone policymakers that the economy continues to show signs of weakness,” said Bert Colijn at ING.
“New business is weakening again for both manufacturing and services with export orders in particular being down sharply as the euro zone economy battles weak demand from abroad.”
The data pushed euro zone government bond yields lower and knocked the euro to its lowest against the dollar since December 2022 as investors bet on faster rate cuts from the European Central Bank.
The central bank has cut rates three times this year to 3.25 percent amid increasing concerns about the bloc’s lacklustre growth outlook.
Money markets expect another quarter-point cut next month and a further 125 basis points of cuts next year that would take the main rate to 1.75 percent by end 2025.
A composite new business index fell to 46.6 from 47.9, its lowest reading this year, suggesting no imminent improvement.
The economic downturn accelerated in both Germany and France with business activity falling at the quickest rate since early this year, the survey showed. Political uncertainty in the bloc’s two biggest economies may be partly to blame.
