The euro zone's dominant service sector shrank in September and firms cut jobs aggressively in reaction to falling demand and global uncertainties, a major survey showed yesterday. The Reuters Eurozone Business Activity index for the sector dropped below the critical 50 line that divides growth from contraction to 49.1 in September from 50.8 in August.
"It was much weaker than expected," said Mr Menno Middeldorp at Rabobank in Utrecht.
"We have been looking at the risks of a recession in the euro zone and this confirms our fear that the chances are higher than a renewed recession in the US."
The reading was the lowest for the index since last November and below the 50.5 consensus forecast.
The figures came out a day after Irish data showed a rise in the month to 53.7 from 52.5 in August.
Job cuts were the deepest recorded in the four-year-old survey, as losses in Germany, the Republic and France pushed the employment index down to 46.5 in September from 48.6, increasing the risk that consumers will become more reluctant to spend.
Weak local demand, combined with faltering exports, has already made Germany, the biggest economy in the 12-nation bloc, one of the region's worst performers.
The German business activity index dropped to 44.6 in September from 47.7 in August.
The euro-zone new business index fell for the first time since January to 48.8 in September from 50.9, the lowest since last December, while the expectations index, measuring whether companies expect business to be better in 12 months time, slipped to 64.5 from 66. - (Reuters)
