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Following in the path of other recent weak data, the European Commissions euro zone economic sentiment indicator, including consumer confidence, fell to 80.4 points in October from 87.5 points in September.
The drop, the sharpest one-month decline on record, brought the index to the lowest point since November 1993 and exceeded by a wide margin economists forecasts for a fall to 85.3 points, as polled by Dow Jones Newswires.
Describing the result as "simply dreadful," analyst Jennifer McKeown at consultants Capital Economics said: "October's terrible EC survey confirms that the euro zone economy is weakening at an alarming rate."
"We now expect the economy to contract by 1.0 percent in 2009," she said, adding that economic activity "now looks set to stagnate at best in all of the euro zone’s major economies."
Overall confidence in the economy of the broader 27-nation European Union also fell to its lowest level since 1993, tumbling to 77.5 points in October from 84.9 in September.
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"The elevated financial sector turmoil, sharply lower equity prices and tight credit conditions have intensified fears about both the domestic and global economic outlooks," said IHS Global Insight economist Hoard Archer.
"Indeed, there are widespread concerns that many euro zone economies will suffer extended, deep recessions," he added.
The index, which covers sentiment in the industrial, services, consumer, retail and construction sector, showed widespread weakness across
Consumer confidence and sentiment in the construction sector in particular took a beating, according to the survey.
The European Commissions separate monthly business climate indicator for the euro zone retreated to the lowest level since 2001, dropping to a negative 1.34 points in October from a negative 0.82 in September.
Evidence of slumping economic sentiment in Europe comes on the heels of
"We had been hoping that the regions relative lack of imbalances would mean that it escaped the severe recession facing the
"This makes another big cut in interest rates next week look all the more likely and rates look set to fall to at least 2.0 by the middle of next year," she added.
Expectations for sharp ECB rate cuts rose earlier this week after surveys in
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