Mon Dec 1, 2008 6:43am EST LONDON, Dec 1 (Reuters) - Factories across Europe put in their worst performance during November since private survey records began more than a decade ago, intensifying pressure for aggressive interest rate cuts this week.
The gloomy news on euro zone and British output was accompanied by data showing inflationary pressures tumbling, removing any doubt that both the European Central Bank and the Bank of England will cut rates on Thursday. The only debate now is over the size of the cuts, with economists generally agreed there is a greater risk the central banks will deliver larger cuts than the 50 basis point consensus.
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"The picture is very grim," said Rainer Guntermann, economist at Dresdner Kleinwort in Frankfurt, describing the euro zone data. "And it's a consistent picture - demand is falling, we're seeing output cuts, a lengthening of delivery times, employment and prices under pressure." ... "We stick to the base case for the ECB to cut rates by 50 basis points, but the data would not stand in the way of a bigger rate cut from the ECB," said Guntermann. A poll of 81 economists last week showed a majority expecting a 50 basis point cut to 2.75 percent. Just over a quarter are looking for an even bigger cut. See:
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Companies are now cutting payrolls aggressively given this is the sixth straight month the PMI has shown contracting activity. The employment index dropped to a new record low of 41.0. On Friday, Eurostat said unemployment in the euro zone had climbed to a near two-year high of 7.7 percent in October.
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Data released on Friday showed inflation across the 15- nation bloc plunged to 2.1 percent in November, only just above the central bank's two percent target ceiling, following a sharp decline in oil prices.
Industrial activity declined across the region, with Germany, the bloc's largest economy, posting a drop to a record-low 35.7 while France's fell to a record low of 37.3. Italian and Spanish manufacturing activity also sank to record lows at 34.9 and 29.4 respectively.
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