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Europe sets recession record

EUROPE'S manufacturing and service industries have contracted at a record pace as consumers held back on spending and companies postponed investments in the face of the worst recession in more than six decades.

A composite index of both industries fell to 36.2 in February, a record low, from 38.3 in January. The index is based on a survey of purchasing managers by Markit Economics and a reading below 50 indicates contraction. Economists forecast an increase to 38.5, a Bloomberg survey showed.

Producers are scaling back output and cutting jobs as the global financial turmoil pushes Europe into the deepest recession since World War II. Several European Central Bank policy makers, including President Jean-Claude Trichet, have said that the central bank may cut interest rates to a record low next month and could consider other measures to stimulate economic growth.

"The renewed downward lurch in both surveys to new record lows significantly undermines hopes that the rate of contraction in euro-zone economic activity could be bottoming out," said Howard Archer, chief European economist at IHS Global Insight in London.

The manufacturing index declined to 33.6 from 34.4 in January, while the services index decreased to 38.9 from 42.2, the lowest on record for both indicators, Markit said. Indexes for output, new orders and employment also dropped to all-time lows, it said.

'Worse and worse'

European governments committed more than 1.2 trillion euros (US$1.5 trillion) to save their banking systems from collapse and pledged to spend a combined 200 billion euros to boost the economy, which is enduring the first recession in the euro's 10-year history. The euro region will contract 1.9 percent this year, according to European Commission forecasts.

The head of the International Monetary Fund, which last month projected a 2-percent contraction in the euro region this year, said that forecast may need to be cut as the global economic slump deepens. "The information we've received since these forecasts are worse and worse," IMF Managing Director Dominique Strauss-Kahn said.

European stocks sank to their lowest level in almost six years on concerns the recession is deepening. The Dow Jones Stoxx 600 Index was down 2.5 percent by midday in London, after tumbling 3.1 percent earlier to 177.79, the lowest level since April 2003.


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