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STORY: Euro zone manufacturing activity showed little sign of recovery last month.

That's according to a key survey released Monday (October 2).

It showed there was a deep and broad-based downturn in September, and demand kept shrinking at a pace rarely surpassed since the data was first collected 26 years ago.

The HCOB final euro zone manufacturing Purchasing Managers' Index - or PMI - dipped to 43.4 in September.

That was down from August's 43.5.

Any reading below 50 marks a contraction in activity.

European powerhouse Germany was hit by weak demand and a rapidly falling output.

The German manufacturing PMI rose to 39.6 in September from 39.1 in August, far below the 50 level.

The survey showed output fell at the fastest rate since May 2020, amid a further sharp drop in new orders.

French manufacturing was also down as the sector contracted for the eighth month in a row in September.

The French PMI came in at 44.2 points, down from 46.0.

Production and new orders fell at their sharpest rates there in more than three years.

Policymakers at the European Central Bank may welcome news of falling prices, having so far failed to get inflation back to target.

Last month the ECB raised its key interest rate for a 10th consecutive time.

Economists project policymakers are likely now done with raising rates, and will stay on hold until at least July next year.