A fresh batch of eurozone data has reinforced fears that the economic downturn may be intensifying rather than easing.

Confidence in the eurozone sank deeper today as the release of dismal PMI figures reflected a loss of momentum in the bloc’s private sector activity, reversing signs of progress in September.

Markit’s Compositive Purchasing Mangers’ Index (PMI) [2], which uses data from around 5,000 business within the 17-nation bloc, serves as a barometer for manufacturing performance and is seen as a reliable growth indicator. Figures below 50 represent contraction, with those above 50 indicating expansion.

Eurozone PMI figures dropped to a 40-month low of 45.8 points in October, down from 46.1 in September, its sharpest decline since June 2009.

This was driven by weaker-than-expected German PMI data, which contracted to 45.7 points from September’s index of 47.4 – its sixth month below the break-even mark of 50. French figures stood at 43.2 points, marking eight straight months of contraction in French manufacturing, despite a 1.6 point rebound from September.

In addition to weak domestic markets, subdued overseas demand, most notably from Asia and to a lesser extent the US, dragged down European manufacturing output.

“It’s very disappointing, it’s a depressing scenario as things are getting worse”, lamented Chris Williamson, chief economist at Markit.

“We are more down than the official data. The PMIs are running at levels historically consistent with GDP falling at about 0.6 per cent”, he added.

The gloomy outlook was confirmed by significant drops in Munich’s Ifo Institute’s business climate index, with figures dropping from 101.4 in September to 100.00 – the lowest reading since February 2010.

Also highlighting the decline, the composite employment index stood at a contractionary level of 46.4 points as firms sought to balance their books with lay offs. US automotive titan Ford axed almost 10,000 jobs after plant closures in Belgium, with Peugeot cutting roughly 6,500 jobs in France earlier this year.

“Businesses are very much in cost-cutting, retrenchment mode, battening down the hatches because they don’t know what the outlook is”, said Williamson.

Official data released earlier in October revealed an 11.4 per cent unemployment rate in August, the eurozone’s highest level since its inception in 1999.

Markets responded negatively to the dismal PMI data, with DAX in Germany down 0.4 per cent, CAC in Paris down 0.2 per cent, and FTSE 100 in London down 0.1 per cent.

The slump in eurozone manufacturing comes amid rising eurozone sovereign debt, which grew from 88.2 per cent in the first quarter to 90 per cent of GDP in the 2nd quarter, according to Eurostat.

Unsurprisingly, Greece was the most indebted state, with public debt worth 150.3 per cent of its GDP, up from 136.9 per cent in the first quarter. Italy and Portugal also clocked up high debt levels, with figures of 126.1 per cent and 117.5 per cent respectively.

The eurozone's lowest sovereign debt was claimed by Estonia, with debt levels of just 7.3 per cent of GDP.