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By Nigel Davies
LONDON, April 1 (Reuters) - The pace of decline in euro zone factory activity eased slightly in March, helped by signs of stabilisation at low levels in France and Germany, but firms shed jobs at record speed, a survey showed on Wednesday.
Data from the survey of manufacturing companies suggested that the quickest pace of decline in factory activity may already have been hit in the first quarter of this year.
But they still pointed to another sharp rate of economic contraction for the euro zone, which has been mired in recession since last year.
The Markit Eurozone Manufacturing purchasing managers' index rose to 33.9 for March from 33.5 in February. The latest figure was revised down from the flash reading of 34.0 published last month and compared with economists' expectations that the final figure would be unchanged.
"There are a few spots where we can have hope ... but for the time being it's all hope. There are no clear signals that the recession will end any time soon," said Juergen Michels at Citi.
The data will add weight to already solid expectations of another interest rate cut on Thursday by the European Central Bank to a new low of 1.0 percent. See
"The ECB will do another 50 basis points tomorrow and probably extend the liquidity provision to banks," said Michels.
Rates of decline in output eased in both of the 16 nation bloc's leading two economies, Germany and France. Spain also saw a mild deceleration, but Italy's factory contraction gathered pace.
The revision in the main euro zone index came partly after the stocks of purchases index, a reflection of the goods stacked up in warehouses, sank to a record low, indicating that factories are selling old stock rather than producing more.
The same story of factory malaise is being spun around the world. Earlier a survey showed business confidence in Japan slumped to a record low in March, while a tentative improvement in Chinese manufacturing faltered.
"Rates of decline in new orders and manufacturing output eased considerably in the euro zone during March, particularly in Germany and France, fuelling hopes that we are over the worst in terms of rates of contraction," said Chris Williamson, chief economist at data provider Markit.
A strong uptick in the output index signalled that the rate of deterioration may slow even more in the second quarter. It rose to 33.4 from 30.8 the previous month, revised up from the 33.2 flash level.
But the key figures in this survey of around 3,000 manufacturers still remained far below the 50.0 mark that divides growth from contraction.
Williamson at Markit said the data still pointed to double digit falls in the annual rate of manufacturing output, and a return to growth was a long way off.
Job losses surged in March and the employment sub-index sank to a record low in the survey's near 12-year history.
Inflationary pressures continued to fall in the euro zone. Both the input and output prices hit record lows, showing a fall in fuel and energy costs.
Annual inflation in the euro zone fell to 0.6 percent in March, far below the ECB's ceiling of 2.0 percent. (Editing by David Stamp)