Euro zone private sector activity sank to the lowest level for three years in the second quarter as business sentiment deteriorated in the crisis-hit region, a key survey shows.
The Purchasing Managers Index was stuck at 46 points in June, the same level as May, indicating another month of contraction in activity.
"The flash PMI for June rounded off the weakest quarter for three years, indicating euro zone GDP is likely to have fallen by 0.6%," said Markit chief economist Chris Williamson.
"Of particular concern is the near-record deterioration in business optimism, combined with marked falls in employment and purchasing by companies," he said.
"This suggests that firms are preparing for conditions to worsen in the coming months, with the darker outlook often attributed to uncertainty caused by the region's ongoing economic and political crises," he added.
The survey of 4,500 companies in the services and manufacturing sectors showed that the economic downturn is "gathering pace and spreading" across the 17-nation euro zone, Williamson said.
He said Germany was on course for a "marginal fall" in gross domestic product in the second quarter while other nations will likely face "far steeper declines" including a drop of 0.6%in France.
The survey showed that output fell in Germany, Europe's biggest economy, for the second month in a row in June and at the fastest rate in three years. In France, the euro zone's second economic power, activity dropped for the fourth consecutive month although the rate of decline eased since May.
In the 15 other euro zone nations, output fell for the 13th month running and at the fastest pace since November.
"Service providers reported the largest month-on-month deterioration in optimism about the outlook since October 2008, when confidence slumped due to the collapse of Lehman Brothers," Markit said.
Companies cut jobs for the sixth month in a row as new orders and backlogs of orders continued to fall, the survey said. The London-based research firm said activity was likely to weaken further in coming months.
