The slowdown in euro zone factory activity deepened in December as new orders tumbled, a business survey showed on Wednesday, suggesting the economy may have slipped further into recession in the last quarter of 2012.
Manufacturers helped lift the 17-nation bloc out of the last recession, but purchasing managers' surveys showed Ireland was the only member of the currency union to register growth in December as the malaise sank its roots further into the bloc's core economies.
"The euro zone manufacturing sector remained entrenched in a steep downturn at the end of the year. The region's recession therefore looks likely to have deepened, possibly quite significantly, in the final quarter," said Chris Williamson, chief economist at Markit.
Markit's Eurozone Manufacturing Purchasing Managers' Index (PMI) edged down to 46.1 in December from November's 46.2. The final December figure was down from an earlier reported flash reading of 46.3. The index has been below the 50 mark that divides growth from contraction since August 2011.
The output index fell to 46.0 from November's 46.1 and as the decline continued, factories cut their work forces at a faster pace than in the previous month.
Germany, Europe's largest economy, saw its manufacturing sector shrink for the 10th straight month and at a faster pace than in November, while French data showed a decline in all but one of the past 17 months, surveys showed earlier.
The slump in Spain deepened last month, while Italy's index remained below 50 for the 17th month.
The euro zone fell into its second recession since 2009 last year and its economy likely contracted again in the fourth quarter, according a Reuters poll, and is only seen returning to growth in the second quarter this year.
"Manufacturers look to be in for another tough year in 2013, though prospects have brightened a little, as producers should benefit from signs of stronger demand in key export markets such as the United States and China," Mr. Williamson said.
New orders, a gauge of future output, fell for the 19th month, with the subindex sinking to 43.5 from 44.2 and considerably lower than the earlier flash reading of 44.1 although the rate of decline in exports eased from the previous month.
Annual growth in China's industrial profits quickened to 22.8 per cent in November from October's 20.5 per cent, official data showed last week, reinforcing signs of a steady economic recovery thanks to pro-growth policies.
However, while the U.S. economy will remain sluggish in 2013, underscoring a very fragile world economic outlook, it will outperform its European peers.