Eurozone at risk of first-ever recession

The eurozone is facing the threat of the first ever recession in its brief history since 1999, according to the latest business data on the 15-country single currency bloc.

A survey issued on Thursday (24 July) of some 5,000 companies showed both manufacturing and services activity declining rapidly in July, after data for March to June suggest that the second quarter may have experienced economic contraction.

If the July to September period continues on its downward trajectory, the eurozone will meet the technical definition of a recession: two consecutive quarters of contraction.

The Eurozone Purchasing Managers Index (PMI), produced by market research group Markit dropped to 47.8 points in July down from 49.3 in June, falling lower than economists' predictions.

The PMI for services companies dropped to a five-year low of 48.3 from 49.1. In the manufacturing sector, the index was down to 47.5 from 49.2.

A figure above 50 in the index indicates growth, while below 50, the sector is going backwards.

Employment in the service sector also shrank in July, the first time the number of services jobs has not grown in four years. And Employment in manufacturing dropped to a three-year low.

Manufacturing output is at its lowest rate since the attacks on New York and Washington in September 2001 and new orders are at their lowest level in seven years.

A slew of other surveys of the French, German and Italian economies also backed up the PMI data.

A key survey of German business sentiment, the Ifo index, showed the business climate in Europe's largest economy at a three-year low.

In France, business confidence fell this month for the sixth month in a row, and slipped to its lowest level since May 2005, according to the INSEE index.

In Italy, business sentiment plunged to its lowest levels for almost seven years, according to a survey from market analysts ISAE.

For its part, the Spanish government, struggling with a collapse in the housing market, has cut its growth forecast for 2008 to 1.6 percent, down from 2.3 percent.

"Economic growth in the eurozone is coming almost to a halt," said Bank of America economist Holger Schmieding, according to AFP.