BRUSSELS, Oct 24: Business activity in the 15 nations that use the euro slumped to a record low in October as the credit crunch caused a demand slump, according to a survey released on Friday.

The eurozone’s purchasing managers’ index (PMI), compiled by data and research group Markit, slid to 44.6 in October from 46.9 in September, according to an initial estimate.

The new figure brought the index to its lowest level since data was first compiled 10 years ago and gave a new sign of Europe’s growing economic woes.

The latest figures are “horrible, showing already weak activity deteriorating substantially further as the financial crisis intensified the already serious problems facing the region’s economies,” said Howard Archer, chief European economist for London-based Global Insight.

The index’s fall marked the fifth consecutive month of contraction, which is indicated by a reading of less than 50 points.

The manufacturing sector index hit a record low, down to a mere 41.3 in October from 44.5 in September.

The services sector index retreated to 46.9, the lowest level for seven years and down from 48.4 in September.

Chris Williamson, Chief Economist at Markit, said the new figures indicate “the alarming extent to which the financial crisis has developed rapidly into an economic crisis, with the eurozone economy contracting at the fastest rate for over 10 years.” Manufacturers are the hardest hit, he said, “with the sector contracting at a pace exceeding even the most pessimistic of forecasts.” Inflationary pressures are “collapsing” alongside falling demand, which will hit profits further but help pave the way for lower interest rates, he added.

The figures left some economists talking about the length of Europe’s recession rather than the possibility of it.

The data suggest “that it is now a question of how deep and long a recession will the eurozone suffer rather than ‘will the recession occur?’,” said Archer.

The purchasing managers’ figures for Europe’s industrial powerhouse Germany did nothing to quell those fears, tumbling from 48.5 in September to 46.7 in October. The French index meanwhile fell by a full two points to 45.1.

In an updated growth forecast last week, German Economy Minister Michael Glos slashed his 2009 prediction for economic growth to just 0.2 per cent, a fraction of the previous forecast of 1.2 per cent.

Eurozone growth “looks likely to be stagnant at best in the latter part of the year,” said Ben May, European economist at Capital Economics.

“In all, another gloomy survey which supports our view that the European Central Bank will continue to cut rates aggressively,” he added.

The European Central Bank cut its main interest rate this month by half a percentage point to 3.75 per cent in joint action with central banks in the United States and several other countries.

French Finance Minister Christine Lagarde said on Friday that the ECB may have to reduce its key interest rate further to help the economy.

“Clearly, the Europeans have more room for manoeuvre on monetary policy instruments” than the United States, she told a press conference in Paris.

Eurozone inflation fell to 3.6 per cent in September after a peak of 4 per cent in June and July.—AFP