Surveys showed that private sector business activity shrank in the euro zone for the first time in two years last month as new orders dried up, stoking fears that the economy could be heading back into recession.
A downturn that began in smaller members of the 17 nation bloc has hit the core and survey compiler Markit said the latest figures suggest the region's economy will contract in the fourth quarter unless business and consumer confidence rallies.
Mr Jeavon Lolay head of global research at Lloyds Banking Group said that "We can't rule out the possibility of recession in the coming quarters. Combined with the global slowdown you have the main growth engine of the euro zone economy, Germany, stuttering."
European concerns about flagging activity were mirrored in India's service sector, which also shrank in September as new business tapered off, two days after a global manufacturing survey showed a first drop in output since June 2009 though firms still took on more workers.
Markit's Eurozone Services Purchasing Managers' Index fell to 48.8 last month from 51.5 in August, its lowest reading since July 2009 and below an earlier flash reading of 49.1. It is the first month the index has been below the 50 mark that divides growth from contraction since August 2009.
The composite PMI, combining the services and manufacturing data published earlier this week and a good guide for economic growth, fell to 49.1 from 50.7 in August, its lowest level since July 2009 and down from a flash estimate of 49.2.
Economists polled by Reuters last month predicted third and fourth quarter growth of 0.2%, but Markit said the result could be even weaker.
Mr Chris Williamson chief economist at Markit said that "A mild output contraction in September sits in stark contrast to the buoyant pace of expansion seen at the start of the year, suggesting that the economy will have stagnated in the third quarter as a whole. Even more disappointing is the steep drop in new business, which suggests that GDP will contract in the fourth quarter unless business and consumer confidence rally in coming weeks."
(Sourced from ET)
