BRUSSELS, Aug 6 (AFP): Business activity in the 15 countries using the euro in July fell to the lowest level since November 2001, as consumer spending falls, surveys showed yesterday, ramping up fears of recession.
The Eurozone's purchasing managers' index (PMI), compiled by data and research group Markit, fell to 47.8 points in July from 49.3 in June, confirming an earlier estimate.
Adding to the bad news, retail sales in the Eurozone fell by 0.6 per cent in June from the May level and by 3.1 per cent on a 12-month basis, a first estimate by the EU statistics office Eurostat showed Tuesday.
The contraction in consumer spending "increases the likelihood that the Eurozone economy contracted in the second quarter," said Howard Archer, chief European economist at Global Insight.
"Consumers' purchasing power is being squeezed markedly by elevated energy and food prices. Furthermore, tight credit conditions, higher interest rates and rising consumer concerns over both the economic outlook and their personal finances are all negatives for consumption," he added.
And that could have an adverse affect on the Eurozone jobless rate, which rose for the fourth month running in June.
The Eurozone PMI survey's component for the services sector fell to 48.3 points in July from 49.1 in June, hitting the lowest level since June 2003.
A level below 50 for the index indicates a contraction of activity in the sector.
"The latest index signalled a contraction of private sector output for the second month running," with "the rate of decline accelerating to the fastest since November 2001," said Markit and RBS in a joint report.
Jennifer McKeown of capital Economics said the fall in Eurozone retail sales adds to the risk that overall GDP fell in the second quarter.
Of the Eurozone's biggest economies only Germany registered an increase of activity in July, but the increase was sharply down.
In Spain and Italy business activity contracted for the seventh consecutive month while France endured its second straight month of contraction.
