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More bad news on eurozone economy

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More bad news on eurozone economy

More bad news on eurozone economy
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It seems the downturn in the eurozone’s private sector is becoming entrenched as falls in new orders and employment levels hit business confidence.

The latest surveys of manufacturers and service companies in the 17 countries that use the euro show activity declined for the fifth consecutive month.

Survey participants were at their most pessimistic since March 2009.

“It is a worryingly steep downturn we are seeing and it is spreading from the periphery, which has been falling at an increased rate, through to Germany. It is becoming deeper and more broad-based,” said Chris Williamson, chief economist at Markit, which carried out the surveys.

The data pointed towards a second quarter contraction in GDP for the region of around 0.6 percent, Markit said.

Having held steady at the start of the year, the bloc’s economy will contract 0.2 percent in the current quarter and narrowly escape recession by stagnating again in the next, according to economists polled by Reuters last week.

While the European Central Bank is not seen cutting interest rates from their record low of 1.0 percent anytime soon, a growing and significant minority are saying the bank will be forced to act as the outlook worsens.

To reduce costs, and giving an indication of their prospects, factories reduced headcount for the fifth month.

“It’s a sign that companies are expecting things to get worse and not better,” Williamson said.

Earlier data from Germany, Europe’s largest economy, showed its manufacturing sector contracted at its fastest pace since June 2009 while its service sector barely expanded, posting its lowest reading in seven months.

In neighbouring France activity declined in both sectors, albeit it at a more moderate pace than last month.