Forex News – Euro zone Services PMI suggest region will contract in fourth quarter

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The euro slipped slightly after disappointing data on euro zone services Purchasing Managers Index (PMI). The data are compiled by Markit and measures changes in business activity across the euro zone.

PMI fell to 47.5 from 47.8, indicating that the euro zone’s private sector economy contracting for the third month in a row in November. Expectations were for no change in the index.

Meanwhile, Germany’s PMI also fell. Germany is perceived to be the powerhouse of Europe and it too is showing signs of weakness i the face of the on going debt crisis in the region. Germany’s services PMI fell to 50.3 from 51.4.

A number below the key 50 level signifies a contraction whereas above 50 is an expansion. So far Germany is managing to keep in the expansion zone, though overall, the euro region is contracting. Italy had the lowest PMI at 47.5 from 47.8.

The PMI data for the euro zone suggest there will be sharp economic contraction in the fourth quarter.

“The major euro zone countries are all now contracting and face the risk of recession,” said Chris Williamson, chief economist at Markit.

The latest Reuters poll of economists showed a 60 percent chance the euro zone would fall into recession.

“Service providers remained worried about the impact of the escalating debt crisis and the darkening economic outlook,” said Markit’s Williamson.

“Particularly steep downturns are occurring in Spain and Italy, while the French and German services economies are more or less stagnating.”

The euro slid after the data at 09:00 GMT to 1.3434 but soon rebounded to a session high of 1.3454.