POll-Euro zone factory PMI at record low, prices ease

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By Jonathan Cable

LONDON, Dec 1 (Reuters) - Euro zone manufacturing activity sank to a record survey low in November, below an already dire flash reading and the outlook remains grim, private sector data showed on Monday.

The gloomy news on output was accompanied by data showing inflationary pressures fell rapidly, opening the door for the European Central Bank to cut interest rates again, as it is widely expected to do when it meets on Thursday. [ECB/INT]

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 estimate and economists' forecasts. It is considerably below the 50.0 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.

"The PMI is consistent with industrial production falling 8 percent on a year ago in November, which would be the sharpest downturn for at least 20 years," said Chris Williamson, chief economist at data compiler Markit.

The euro zone was officially declared in recession this month following a second quarterly contraction in economic output. Analysts do not see the economy growing again until the third quarter next year -- and then only marginally. [ECILT/EU]

Companies are now cutting payrolls aggressively given this is the sixth straight month the PMI has shown contracting activity. The employment index dropped to a new record low of 41.0. On Friday, Eurostat said unemployment in the euro zone had climbed to a near two-year high of 7.7 percent in October.

However, input price pressures falling to a seven-year low and the output price index sinking to a level not seen since July 2003 will strengthen expectations for a substantial interest rate cut by the European Central Bank on Thursday.

Data released on Friday showed inflation across the 15 nation bloc plunged to 2.1 percent in November, only just above the central bank's two percent target ceiling, following a sharp decline in oil prices.

Industrial activity declined across the region, with Germany, the bloc's largest economy, posting a drop to a record-low 35.7 while France's fell to a record low of 37.3. Italian and Spanish manufacturing activity also sank to record lows at 34.9 and 29.4 respectively. "No countries have been left unaffected by the growing impact of the financial crisis on the real economy, with manufacturing output falling at survey record rates in all euro zone nations as both export and domestic demand has collapsed," Williamson said.

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