FRANKFURT (Nov 20): The euro-area economy risks a renewed slowdown.

A Purchasing Managers Index for factories and services activity unexpectedly fell to 51.4 in November, the lowest in 16 months, from 52.1 in October, London-based Markit Economics said today.

Economists surveyed by Bloomberg News predicted an increase to 52.3.

A reading above 50 indicates expansion.

A composite measure for Germany also declined, while in China, a factory gauge dropped to a six-month low.

While unprecedented stimulus by the European Central Bank will start to take effect in coming months, weak growth in Germany and France and rising tension in Ukraine threaten the euro area’s modest revival.

The 18-nation economy expanded 0.2 percent in the third quarter.

The decline in the PMI numbers “raises the risk of the region slipping back into a renewed downturn,” said Chris Williamson, chief economist at Markit.

“The deteriorating trend in the surveys will add to pressure for the ECB to do more to boost the economy without waiting to gauge the effectiveness of previously-announced initiatives.”

ECB stimulus
Markit’s factory PMI for China fell to 50.0 in November from 50.4 in October, below the median estimate of 50.2 in a Bloomberg News survey.

In the euro area, the ECB will start buying asset-backed securities this week as part of stimulus plans that already include covered-bond purchases, long-term loans to banks and record-low interest rates.

ECB President Mario Draghi said this month that officials have been tasked with preparing new measures to be deployed should the outlook worsen.

Inflation in the euro area was 0.4 percent in October, up from September’s 0.3 percent though still far from the ECB’s goal of just under two percent.

While Markit said companies continued cutting prices, a trend that has been under way since April 2012, the rate of decline slowed in November.

A gauge of manufacturing activity in the region fell to 50.4 in November from 50.6, today’s report showed, while a similar index for the services industry declined to 51.3 from 52.3 in October.

In Germany, manufacturing and services expanded at the slowest pace in 16 months, signalling that growth in Europe’s largest economy is poised to remain sluggish.

French manufacturing continued shrinking as demand fell, casting doubt on the solidity of the country’s economic rebound seen in the third quarter.

“France remains a key concern” and “growth in Germany has meanwhile slowed to the weakest since the summer of last year,” said Markit’s Williamson.

“The rest of the region as a whole continues to outperform the two ‘core’ countries, though even here the rate of expansion has cooled.”