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Euro zone business activity shrinks further

Euro zone business activity shrinks further
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The euro zone’s private sector slipped further into decline in October.

The latest business surveys show the bloc’s economy is now in serious danger of sliding from stagnation into full on recession.

Shrinking order books and plummeting confidence sent euro zone factories into contraction for the third month in a row.

The service sector — that is everything from banks to restaurants — shrank for a second month running.

The Flash Markit Eurozone Purchasing Managers’ Indexes showed little hope of cheerier days ahead soon, even as Europe’s leaders labour over effective means to fight a sovereign debt crisis that threatens to unleash a new global financial crisis.

“Most indicators seem to suggest it is going to get worse not better in the coming months. So there is a significant chance of a contraction in the fourth quarter,” said Chris Williamson, chief economist at Markit, which carries out the surveys.

He said the current level of the indexes, which have a good record of tracking economic growth, could signal a quarterly rate of decline approaching half a percentage point.

A poll conducted earlier this month by Reuters showed a 40 percent chance that the euro zone will slip back into recession, while economists now expect the European Central Bank to reverse some of its monetary policy tightening later this year.

German manufacturing contracted this month for the first time in two years, according to individual country PMIs. The service sector rebounded unexpectedly but that was perhaps the only bright spot among this month’s surveys.