Euro zone manufacturers had their worst month in at least 12 years in February as a recession showed no signs of easing and firms slashed jobs, a survey showed on today.
The already tough environment faced by factories in the 16-nation bloc deteriorated last month, showing that signs of stabilisation at the start of the year were illusory, reinforcing the case for more government and central bank action to rebuild confidence.
Markit's euro zone manufacturing purchasing managers' index for February sank to a record low in the survey's history of 33.5 from 34.4 the previous month. That was a touch lower than the flash reading of 33.6, also the consensus forecast.
It is also considerably lower than the 50 mark that divides growth from contraction. But markets and the euro showed little reaction to the data.
The pace of contraction in Germany's manufacturing sector eased slightly last month, but was still at a brisk rate as export orders dried up and employment rose to record levels.
France and Italy also witnessed sharp declines in output last month, while Spain showed a hint of stabilisation albeit at a very low level. Later today, the US ISM index is also likely to confirm a sharp contraction in manufacturing there.
Data provider Markit said the PMI was consistent with manufacturing output and employment falling at annual rates in the region of 12 and 5 per cent respectively, suggesting a dire rate of economic contraction in the current quarter.
"Look for more weakness in GDP in the current and next quarters," said Kenneth Broux, economist at Lloyd's.Euro zone Gross Domestic Product shrank by a record 1.5 per cent in the last three months of 2008.
Economists said the data made the prospect of a European Central Bank interest rate cut on Thursday even more likely.
Euro zone output sank to a new record low, with the output PMI revised even lower than the flash level. New orders taken also fell to a record low, to 28.2 from 29.0 the previous month, down on the 28.4 flash reading.
The data hint at worse to come for official industrial data this year. Data last week showed industrial new orders in the euro zone in December fell by 5.2 per cent month-on-month, the biggest fall on record.
The same is going on much further afield, with Japanese industrial output falling by 10.0 per cent in January from the previous month, its biggest drop on record.
In turn manufacturers are being forced to lay off thousands of staff. The employment index slipped to an all-time low in February. Official unemployment in the euro zone rose to 8.2 per cent in January, its highest since the summer of 2006 and climbing fast.
Reuters