The Reuters Eurozone Purchasing Managers' Index fell below the critical 50 level in April, signaling that the region's manufacturing economy is shrinking for the first time in over two years as a global slowdown bites.
The PMI, based on a survey of more than 2,000 European manufacturing companies, tumbled to 49.3 from 51.2 in March as national PMIs for the euro zone's big three economies - France, Germany and Italy - all dropped below the no change level. On the PMI any figure over 50 signals growth in manufacturing and any below 50 shrinkage.
Until now the PMI has had only one trip below 50 in its almost four-year history. That was between October 1998 and February 1999 when global confidence wobbled due to economic crises in Asia, Russia and Latin America, and the near collapse of the huge LTCM hedge fund.
Gloom spread over the euro zone's three biggest economies. National indices for France and Germany fell through 50 to 49.3 while Italy, only just above in March at 50.8, slipped to 49.2.
The data was worst in France, which has led euro zone economic growth in the past two years. Its April drop of 3.2 was the sharpest of the three, down from 52.5 in March.
In the surveys, conducted by NTC Research for Reuters, companies are asked whether various aspects of their business have grown, stayed the same or shrunk in the past month.