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 The downbeat data, alongside evidence of further price-cutting, will
add to calls for more policy action from the European Central Bank,
while the first drop in Chinese manufacturing output for six months
will heap similar pressure on authorities in Beijing.
"It does reinforce the case for quantitative easing from the
European Central Bank," said Alan Clarke, European economist at
Scotiabank, of the euro zone PMIs.
Markit's Composite Flash Purchasing Managers' Index for November,
based on surveys of thousands of companies and seen as a good growth
indicator, fell to 51.4, missing even the lowest forecast in a
Reuters poll.
The service industry PMI also undershot all forecasts by falling to
51.3, while the factory PMI's dip to 50.4 missed consensus. However,
all three readings held above the 50 mark that separates growth from
contraction.
Markit said the PMI pointed to 0.1-0.2 percent GDP growth in the
euro zone in the current quarter, compared with the 0.2 percent
forecast in a Reuters poll taken last week. <EUGDPQ>
"November's fall in the euro zone composite PMI is a serious blow to
hopes that the recovery would resume towards the end of the year,"
said Jennifer McKeown, senior European economist at Capital
Economics.
Forward-looking indicators suggest the situation is unlikely to
improve anytime soon.
The composite new orders index fell below 50 for the first time
since July 2013, and factories, which barely increased staffing
levels, ran down old orders faster than last month.
But likely of greatest concern for the ECB, which is facing the
spectre of deflation, service firms cut prices they charge again, as
they have done ever since late-2011.
Euro zone prices rose 0.4 percent in October, well below the ECB's
target of just under 2 percent and stuck firmly in what it terms the
inflation danger zone.
To keep the region from slipping into deflation, the ECB has been
pumping money into the banking system by buying covered bonds and
offering cheap long-term loans to banks.
The chances it takes the plunge and buys sovereign bonds are now
50-50, a Reuters poll found.
Outside the euro zone, British retail sales grew much more strongly
than expected in October, giving further evidence the UK economy is
leaving the euro zone's in its wake. A U.S. flash PMI due later also
is expected to show activity picked up in the world's largest
economy.
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There was also rare glimpse of good news from Japan, which reported
surprisingly strong growth in exports for October, a shift that
should get a further boost from the latest dive in the yen.
BRITTLE CHINA
In China, the world's second biggest economy, the HSBC/Markit
manufacturing PMI reading showed a drop to a six-month low of 50.0
in November. The factory output sub-index fell to 49.5, its first
contraction since May.
A cooling property market, erratic foreign demand and overcapacity
have weighed on its manufacturers and the broader economy this year
despite a steady stream of stimulus measures.
China's annual growth slowed to 7.3 percent in the third quarter,
leaving 2014 on track to be the slowest in 24 years.
"We still see uncertainties in the months ahead from the property
market and on the export front. We think more monetary and fiscal
easing measures should be deployed." said Hongbin Qu, chief China
economist at HSBC.
The Markit/JMMA version of Japan's PMI was more mixed. While the
headline index edged down to 52.1 in November, from 52.4 in October,
output expanded at its fastest clip in eight months.
Firms may have been responding to better offshore demand as exports
soared, reflecting a weaker yen.
Policymakers were taken by surprise earlier this week when data
showed the economy fell into recession in the third quarter,
underlining the necessity of the Bank of Japan's super-loose policy
and sending the yen to fresh lows.
(Editing by John Stonestreet)
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