Eurozone economy 'close to stalling' as output falls across manufacturing and services
The eurozone economy struggled in September as demand for both goods and services fell at the fastest rate in more than six years, data showed on Monday.
The IHS Markit flash eurozone composite purchasing managers' index for September was 50.4, down from 51.9 in August and the weakest expansion in output across manufacturing and services since June 2013. The data was well below forecasts, with most economists predicting a reading of 52.0.
The services PMI eased to 52.0 from 53.5, while the manufacturing PMI fell from 47.0 to 45.6, an 83-month low.
The 12-month outlook remained at the lowest point for seven years. Those surveyed said trade wars and geopolitical concerns, notably Brexit, were exacerbating underlying fears about weaker economic growth and demand.
Within individual eurozone countries, Germany saw output fall for the first time since April 2013, with the rate of decline the steepest since October 2012. The composite PMI was 49.1, down from August’s 51.7 and well below consensus for 51.5.
Germany’s under-pressure manufacturing sector recorded a PMI of 41.4, a sharp fall on August’s figure of 43.5. Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, called the figure "gruelling".
In France, the composite PMI was also below consensus at 51.3 against August’s 52.9. Economists had been looking for 52.6.
Chris Williamson, chief business economist at IHS Markit, said: "The eurozone economy is close to stalling as a deepening manufacturing downturn shows further signs of spreading to the services sector. The survey data indicate that GDP looks set to rise by just 0.1% in the quarter, with momentum weakening as the quarter closed.
"The overall picture of an economy on the cusp of sliding into decline is underscored by a further deterioration in firms’ pricing power, with average prices charged for goods and services barely rising in September.
"With survey data like these, pressure will grow on the European Central Bank to add to its recent stimulus package."
Pantheon Macroeconomics’ Vistesen said: "[This was] not the end to the third quarter we had been hoping for.
"New orders growth weakened across the board, driving a contraction in the private sector as a whole for the first time since 2013. Output rose, but this was primarily due to firms eating into existing work backlogs."
However, he added: "We concede that today’s data add fuel to the idea that a recession in manufacturing is now about to drag the economy as a whole down, but we need a bit more evidence to make this our base case. Meanwhile, for markets, the key story also is that policy makers are much more likely to respond with force, both fiscal and monetary, than to sit idle.”
Analysts at Rabobank said the data "heightened concerns regarding the fallout from the ongoing trade war on European growth".
The unexpectedly downbeat figures weighed heavily on European markets. By 1030 BST, the CAC 40 was trading 1% lower and the DAX 30 was off nearly 2%. The euro softened against both the pound, at 0.8817p, and the dollar, dipping below $1.10.