THE EURO zone has plunged deeper into recession this month, putting the 15-country region on course to report its worst quarter on record by far, a closely watched survey showed yesterday. Euro- zone employment also fell in the third quarter for the first time, according to Eurostat, the European Union's statistical office.
The deterioration adds to pressure on the European Central Bank (ECB) to consider further interest rate cuts. But Jean-Claude Trichet, the ECB's president, said late on Monday that rates should not fall too far and stressed the importance of ensuring cuts already announced fed into the economy. Mr Trichet hinted, however, that the ECB would attempt to revive bank lending by slashing the interest rate it pays on the huge sums that are parked with it by banks overnight, rather than lent to others.
Euro-zone private-sector activity contracted for a seventh consecutive month in December, according to the purchasing managers' indices, and at the fastest rate since the survey began a decade ago. The composite index, covering services and manufacturing and regarded as an early indicator of growth trends, fell from 38.9 in November to 38.3 in December. A figure below 50 indicates contraction.
The latest results were consistent with gross domestic product contracting by 0.6 per cent in the fourth quarter - easily the fastest since the launch of the euro in 1999, analysts said. German manufacturing contracted particularly fast this month.
- (Financial Times service)
