Factories across Europe put in their worst performance during November since private survey records began more than a decade ago, intensifying pressure for aggressive interest rate cuts this week.
The gloomy news on euro zone and British output was accompanied by data showing inflationary pressures tumbling, removing any doubt that both the European Central Bank and the Bank of England will cut rates on Thursday.
The only debate now is over the size of the cuts, with economists generally agreed there is a greater risk the central banks will deliver larger cuts than the 50 basis point consensus.
The Markit Eurozone Purchasing Managers Index (PMI) for the manufacturing sector slumped to 35.6 in November, a low not seen in the survey's 11-year history and well below the 36.2 flash reading and economists' forecasts.
The European data echoed a survey published overnight showing Chinese manufacturing activity also slumped on a collapse in export orders, a report that came just days after an aggressive interest rate cut there.
A comparable report from the US due at 3pm is expected to show another lurch lower for manufacturing, which is already contracting very rapidly.
"The picture is very grim," said Rainer Guntermann, economist at Dresdner Kleinwort in Frankfurt, describing the euro zone data. "And it's a consistent picture - demand is falling, we're seeing output cuts, a lengthening of delivery times, employment and prices under pressure."
"We stick to the base case for the ECB to cut rates by 50 basis points, but the data would not stand in the way of a bigger rate cut from the ECB," said Mr Guntermann.
A poll of 81 economists last week showed a majority expecting a 50 basis point cut to 2.75 percent. Just over a quarter are looking for an even bigger cut.
Britain's manufacturing PMI tumbled to a record low of 34.4, well below the Reuters consensus for 40. It was also the biggest one-month fall in the series, which began in 1992, at the tail end of Britain's last recession.
The US manufacturing survey for November from the Institute for Supply Management later today is also expected to fall to a new cycle low of 37 compared with 38.9 in October.
At 35.6, the Markit euro zone PMI is now considerably below the 50 mark that separates growth from contraction and the outlook is far from rosy with output, new orders and backlogs of work at record lows, as were PMI indexes for all four of the biggest euro zone countries.
Reuters