BRUSSELS: Eurozone private sector business activity declined for an eighth straight month in September, hitting its gloomiest patch in three years as French activity plunged, a survey showed Thursday.
The closely-watched Purchasing Managers Index (PMI), a survey of 5,000 eurozone businesses compiled by Markit research firm and a key forward-looking indicator, came in at 45.9 points, down from 46.3 in July.
Any reading below 50 indicates contraction in activity.
Taken together with previous months the data suggested "the worst quarter for three years," Chris Williamson, Markit chief economist said in a statement.
He tipped a 0.6 percent contraction in gross domestic product for the quarter, which would confirm a return to recession.
"We had hoped that the news regarding the ECB's intervention to alleviate the debt crisis would have lifted business confidence, but instead sentiment appears to have taken a turn for the worse," Williamson said, referring to plans by the European Central Bank to buy bonds issued by struggling eurozone governments.
He said the business outlook was "the most gloomy since early-2009," with the "gloom clearly reflected in headcounts falling at the fastest rate since January 2010 as companies seek to adjust to weaker demand".
At the same time, the survey reported company costs rising -- mainly through energy prices -- despite weak global demand bringing output prices down.
"Some good news came from an easing in the rate of contraction in Germany, though the rate of decline accelerated markedly in France," Williamson added of the detail.
Germany's composite PMI came in 49.7, up markedly from 47.0 in August, with improvement in both the services and manufacturing sectors.
"However, the halt to the private sector downturn seems to have a fragile veneer, given the reliance on pipeline projects over new business to stabilise output," said Markit Senior Economist Tim Moore.
German businesses burned through their backlog of work in September and new orders continued to decline, although at a slower rate.
"A lack of incoming new work, combined with a sharp drop in year-ahead expectations for activity, meant that service providers cut back on staffing levels at the most marked pace since May 2009," added Moore.
The French composite index plunged to 44.1 points in September, its lowest reading in over three years, from 48.0 in August.
Markit said surveys in France revealed accelerated falls in output in both services and manufacturing, with the manufacturing subindex also at a 41-month low of 42.6 points.
"All the more concerning was the fact that new business and employment also showed accelerated declines, while service providers' future expectations slipped into negativity for the first time since early 2009," said Jack Kennedy, the author of the France index report.
"GDP may have stagnated for three successive quarters up to Q2, but yet more weak PMI data points firmly towards a contraction in Q3," he added.
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