Manufacturing activity in the euro zone fell last month to its lowest level since December 1998, driven down by a contraction in German industry.
The Reuters-NTC purchasing managers' index (PMI) fell to 47.9 in June from 48.5 in May, indicating that the euro zone's manufacturing sector has shrunk for the past three months.
Economists were divided on whether the mounting evidence of slower economic growth might persuade the European Central Bank to cut interest rates at its next meeting on Thursday.
Several ECB council members have said in the past week that the euro zone was still capable of growing this year at its long-term average rate of 2 to 2.5 per cent, and that they did not regard the present level of interest rates as restrictive for growth.
However, Mr Gerhard Schroder, the German chancellor, took the ECB to task last Friday, saying it had an obligation to sustain economic growth as well as to contain inflation, which in May hit a peak of 3.4 per cent in the euro zone.
Yesterday's PMI data underlined that Germany's economic slowdown is more severe than in virtually any other euro-zone member-state.
The German PMI fell to 46.6 last month from 48.8 in May. Any reading below 50 indicates that manufacturing activity is contracting.
Japan's most authoritative survey of business sentiment yesterday revealed a sharp decline in confidence, reflecting the rapid deterioration in an economy that many believe is already in recession.
The survey is likely to increase pressure on the Bank of Japan, which holds a policy meeting next week, for further easing but few expect a move until next month at the earliest.
