LONDON, Oct 4 Reuters The euro zone economy probably shrank last quarter, according to a survey which showed demand fell in September at the fastest pace in almost three years as indebted consumers reined in spending in the face of rising borrowing costs and higher prices.

HCOB39;s final Composite Purchasing Managers39; Index PMI, compiled by SP Global and seen as a good gauge of overall economic health, nudged up to 47.2 in September from August39;s 46.7.

But that was below the 50 mark separating growth from contraction for a fourth consecutive month, albeit just ahead of a preliminary estimate of 47.1.

Wednesday39;s survey showed the downturn was broadbased as, like in August, output declined in both services and manufacturing.

Meanwhile, retail sales in the euro zone fell much more than expected in August, official data showed, pointing to weaker consumer demand as inflation remains high.

The drop in retail sales in August and weakness in the final PMIs for September are consistent with our view that the euro zone economy will fall into recession in the second half of 2023, said Franziska Palmas at Capital Economics.

German service sector activity edged up in September but in France the industry shrank at the fastest rate in almost three years as falling new orders and export business weighed on the euro zone39;s secondbiggest economy, sister surveys showed.

Italy39;s services industry contracted fractionally in September for a second month although Spain39;s…