Business activity in the 17 nations that use the euro contracted in September, raising the threat of a renewed downturn in the economy as a whole. Factory orders, meanwhile, rose in July at the weakest year-to-year pace since November 2009.
Financial data company Markit said its preliminary composite Purchasing Managers' Index fell to 49.2 in September from 50.7 in August. The sub-50 reading means business activity contracted in September for the first time since July 2009, when the euro-zone economy emerged from recession.
The figures will heighten concerns over the euro zone's economy as its sovereign-debt crisis grinds on, and likely raise the pressure on the European Central Bank to support the economy just months after it raised interest rates in a bid to tackle inflation.
The PMI readings "make grim reading and raise the specter a renewed economic downturn in the 17-country region," said Martin van Vliet, economist at ING Bank NV.
The sovereign debt crisis means many governments are committed to austerity measures to pacify investors and keep their market borrowing costs down. That means the onus is likely to fall on the region's central bank, Mr. Van Vliet said.
"Today's data will amplify pressure on the ECB to come to the rescue and use the remaining scope for monetary stimulus," he said. Economic growth in the currency bloc slowed sharply to 0.2% in the second quarter, from 0.8% in the first three months of the year. Official data for the third quarter won't be published until mid-November.
A forward-looking part of the PMI survey brought further bad news, pointing to continued weakness in coming months. New orders taken by euro-zone businesses fell for the second straight month, and at their steepest rate since July 2009, Markit said.
Factory orders suffered as demand for goods eased across much of the region, data showed Thursday. European Union's statistics agency Eurostat said new industrial orders fell 2.1% on a monthly basis in July and grew 8.4% on an annual basis.
The annual gain was the lowest since a 2.6% year-to-year fall in November 2009, while the monthly decline was the biggest since a 4% drop in September 2010. The July data compare with June's revised 1.2% monthly drop and a 10.6% increase on the year.
Orders are a forward looking indicator of industrial activity as they give an idea of the level of new business coming in, so the July data suggest official output likely weakened in the third quarter.
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