Eurozone economy faces worst quarter in 3 years

Economic gloom in the eurozone is set to worsen, according to a key business indicator, as more companies adjust to weak demand by shedding workers. Recession is expected to return to all of its members, except Germany. The closely-watched Purchasing Managers Index (PMI) dropped to 45.9 points in the eurozone in September, down from 46.3 points in August, British research group Markit said Thursday, after polling 5,000 eurozone businesses in the course of the month. The reading showed private sector business activity declining for the eighth consecutive month, Markit Chief Economist Chris Williamson said in a statement, with the data suggesting that the 17-nation currency area would see the "worst quarter for three years" at the end of the month. "The gloom is clearly reflected in headcounts falling at the fastest rate since January 2010, as companies seek to adjust to weaker demand," he added. Markit expects a 0.6-percent contraction in Gross Domestic Product (GDP), meaning a return to recession marked by two consecutive quarters of shrinking economic output. The British researchers said they had hoped a recent announcement by the European Central Bank (ECB) to start buying the debt of struggling eurozone members might have lifted business confidence. However, business sentiment had taken a "turn for the worse," adding to the "most gloomy" outlook since early 2009. According to the PMI index, French business activity has suffered a particularly sharp downturn in September, with Europe's second biggest economy likely to shrink by as much as 0.6 percent after zero growth in the first two quarters of 2012. By contrast, the German PMI reading showed the country's manufacturing sector climbing to a six-month high, with the service sector breaching the 50-point mark, which separates economic growth from contraction.