European manufacturing contracted at a record pace in October as the financial crisis damped demand and companies scaled back production.
Royal Bank of Scotland Group's manufacturing index dropped to 41.1 in October from 45 in September. That's lower than an initial estimate of 41.3 published on October 24th and the worst reading in the survey's 11-year history.
The index is based on a survey of purchasing managers by Markit Economics in London and a reading below 50 indicates contraction.
European manufacturers including German carmaker Bayerische Motoren Werke AG are cutting production as the global credit crunch curbs sales.
The European Commission said today the 15- nation euro region probably entered a recession in the third quarter and the economy will barely grow next year.
"Virtually every survey in the euro zone is plummeting," said Dominic Bryant, an economist at BNP Paribas in London. The financial crisis has started to hurt emerging markets, "and that's coming back to export demand in the euro zone," he said.
Manufacturing contracted more than initially estimated in Germany, France and Italy, today's report showed. Input and output price inflation slowed sharply across the region.
European Central Bank President Jean-Claude Trichet said last week the bank may reduce rates at its November 6th meeting.
The Frankfurt-based ECB joined a coordinated rate reduction with other central banks on October 8th, lowering its benchmark by half a percentage point to 3.75 per cent.
Investors expect at least another half-point reduction this week, Eonia forward contracts show.
Continental AG, Europe's second-largest car-parts maker, lowered its sales forecast October 30th and began "extensive" cost- cutting including reductions to its workforce.
General Motors Corp's Adam Opel unit has suspended production at German plants in Bochum and Eisenach, while Ford Motor decided to reduce production at its Cologne plant.
Bloomberg