LONDON (AFX) - Euro zone figures due for release this week are expected to show a further decline in the manufacturing sector coupled with falling producer prices, supporting the case for a cut in interest rates at the European Central Bank's Nov 8 meeting, economists said. Economists said the ECB's decision to keep rates on hold at 3.75 pct on Thursday despite the increasingly gloomy outlook for economic growth in the euro zone suggests it is awaiting further information before making a move.
"We think there is a good reason to believe that the survey and producer price data that is set to become available over the next week will provide that information," UBS Warburg economists said. Economists predicted a sharp fall in the purchasing managers index for the euro zone manufacturing sector in October, following its decline in September to 45.9, the lowest figure since the series began in June 1997.
They said the September PMI was too early to give a sense of the economic impact from the terrorist attacks against the US. "By contrast, the PMI in October is likely to have dropped sharply, reflecting a fall in incoming orders, a perception that stocks are above normal levels and expectations of lower output in the months to come," Schroder Salomon Smith Barney economists said.
"We expect a figure in the low 40s, which would be consistent with a solid decline in manufacturing output and, probably, no growth in the economy overall," they said.
Economists said the French industrial survey for October is likely to echo the pessimistic findings of the recent German Ifo survey. "The September survey, which was already modestly influenced by the events of Sept 11, gave early indications of falling confidence," SSSB economists said.
Economists noted that producer price figures from France, Italy and Spain are likely to point to a decline in inflation, which would leave further room for manoeuvre on ECB monetary policy.
"We expect favourable base effects to support lower rates of headline inflation," UBS Warburg economists said.

Economists' forecasts for euro zone indicators due Oct 29-Nov 2

AFX CONSENSUS PREVIOUS

TUESDAY OCT 30
France Oct business confidence indicator 90.0 94.0
France Oct industrial survey -51.0 -48.0

Italy Sept PPI
month-on-month (pct) 0.0 0.0
year-on-year (pct) +0.3 +1.2

WEDNESDAY OCT 31
France Sept unemployment rate (pct) 9.1 9.0

France Sept PPI
month-on-month (pct) +0.1 -2.0
year-on-year (pct) -0.3 +0.7

Italy Oct preliminary CPI
month-on-month (pct) +0.2 0.0
year-on-year (pct) +2.5 +2.6

Spain Sept PPI
month-on-month (pct) 0.0 -0.2
year-on-year (pct) +0.5 +1.6


FRIDAY NOV 2
Euro zone Oct manufacturing PMI 45.1 45.9