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Euro-Area Factory, Services Output Contracts for 9th Month

November 06, 2012

Euro-area services and manufacturing output contracted for a ninth month in October, adding to evidence that the single-currency bloc’s economy is in a recession.

A composite index based on a survey of purchasing managers in both industries dropped to 45.7 from 46.1 in September, London-based Markit Economics said today. That’s below an initial estimate of 45.8 on Oct. 24. A reading below 50 indicates contraction.

“The euro-zone downturn appears, if anything, to be deepening rather than easing,” said Howard Archer, an economist at IHS Global Insight in London. “It already looks highly probable that the euro zone is headed for further economic contraction in the fourth quarter.”

At least five euro area countries are already in recession, and fiscal turmoil is showing signs of spreading to the region’s core nations. Economic confidence fell for an eighth month to the lowest in more than three years in October, adding to signs the slump extended into the fourth quarter.

The euro was little changed against the dollar after today’s report, trading at $1.2791 at 10:51 a.m. in Brussels. The Stoxx Europe 600 Index rose 0.4 percent.

An indicator of services output dipped to 46 from 46.1 in September, today’s report showed. A gauge of manufacturing in the 17-nation euro area fell to 45.4 from 46.1.

‘Weak Domestic Demand’

“The final euro-zone PMI reading came in at a level historically consistent with the region’s economy contracting at a quarterly rate of around 0.5 percent, confirming the picture painted by the earlier flash estimate,” Markit senior economist Rob Dobson said in the report. “Sentiment is still being hit hard as companies worry about the dual impact of weak domestic demand and a slowing global economy.”

European companies are facing a struggle to maintain sales as demand from consumers in Europe weakens. Continental AG Chief Executive Officer Elmar Degenhart said on Oct. 31 that “the road is becoming rockier” as Europe’s second-largest maker of car parts stuck to 2012 earnings targets after growth in North America and Asia offset weakness at home. Meanwhile Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest bank, said on Oct. 31 that third-quarter profit fell 82 percent as it continued to purge soured real estate assets.

The European Central Bank, which has pledged to purchase government bonds along with the euro-area rescue fund to fight the fiscal crisis, is forecast to leave its benchmark rate unchanged at its Nov. 8 meeting, according a Bloomberg survey of 63 economists.

To contact the reporter on this story: Svenja O’Donnell in London at

To contact the editor responsible for this story: Craig Stirling at

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