Economists were looking for a reading of 46.5.
"The flash PMI for July suggests the euro area downturn showed no signs of letting up at the start of the third quarter and is consistent with GDP falling at a quarterly rate of around 0.6%, which is similar to the rate of decline we expect to see for the second quarter," said Chris Williamson, Markit's Chief Economist.
The manufacturing component of the index was particularly ugly, falling to a 37-month low of 44.1.
"Manufacturing output fell at the steepest rate since May 2009," according to the report.
The services component improved to 47.6, a four month high. Nevertheless, it still signals contraction.
"The fall in output was widespread across the single currency area, with both the core and periphery contracting."