Eurozone businesses suffered another dismal month in October, suggesting the economy may be headed for a deeper recession than expected, but conditions improved slightly for US and Chinese manufacturers. In Europe, a slump that began with a debt crisis in Greece had spread across the 17-country euro zone as factory output in Germany, the region's biggest economy and top exporter, plunged.
The malaise indicated the downturn could accelerate over the final months of the year, deepening a euro zone recession. "It's very disappointing. It's a depressing scenario, as things are getting worse," said Chris Williamson, chief economist at financial data firm Markit. Markit's Composite Purchasing Managers' Index (PMI) for the euro zone, which polls some 5,000 businesses, fell to 45.8 this month, its lowest reading since June 2009. It has been below the 50 mark that separates growth from contraction since February. Things were a bit brighter in North America and Asia.
A survey showed China, the world's second largest economy, was recovering from its weakest period of growth in three years. While manufacturing contracted for a 12th straight month, output hit a three-year high and order books were their most robust since April. The outlook was a bit more tempered in the United States. Its manufacturing sector managed to grow this month with Markit's manufacturing PMI index edging up to 51.3, but weak overseas demand and uncertainty surrounding US elections and fiscal policy suggested its recent difficulties were not over.
"Europe is still struggling a lot and it's the United States' trading partner. There are some concerns about the fiscal cliff as well as the US Presidential election," said Robert Van Batenburg, head of global research at Louis Capital Markets in New York. "There is some measure of hope out there, but I'm sceptical about what will happen between now and March." Though US growth has been sluggish in recent months and is not expected to be much above 2 percent for the year, the economy has been more resilient than that of Europe or Japan. In part, that may be thanks to a modest recovery in housing. New single-family US home sales surged in September to their highest level in more than two years.
Corporate earnings have been mixed as well. Strong results from Boeing Co and the hopeful Chinese factory data provided temporary relief to a slumping stock market. But worries about global growth have weighed on some firms. Chemical companies DuPont and Dow Chemical Co both plan to lay off workers to counter slower global demand. Specialty glass manufacturer Corning Inc, also said it would cut jobs to offset slower sales.