CdM | Eurozone private sector activity contracted in September for the first time in seven months, according to preliminary PMI data from Hamburg Commercial Bank and S&P Global, which also shows signs of weakening on the services side.
In particular, the advance composite PMI for the euro area came in at 48.9 from 51 in the previous month, its worst reading in eight months. In the case of the services sector, the index fell in September to 50.5 from 52.9 in August, its lowest reading in seven months, while manufacturing activity worsened by one point to 44.8, a nine-month low. Thus, September would have seen a ‘renewed decline’ in private activity with its first decline in seven months amid a ‘sustained reduction’ in new orders.
In fact, new orders declined at the strongest pace since last January. As new orders and order backlogs declined at ‘sharper’ rates and business confidence fell to a ten-month low, companies cut staff for the second month in a row.
At the same time, weak demand led to a slowdown in both cost and price inflation. The decline in total activity was driven by a growing slowdown in European industry, where output fell for the 18th consecutive month and at the fastest pace so far this year. Although activity in the services sector continued to rise, the latest expansion was only ‘minimal’ and the weakest since last February.
After the Olympic Games-generated boost to services in August, total activity in France returned to negative territory in September, joining Germany, whose decline in activity was the steepest since February. The rest of the euro area pointed to a further rise in total activity at the end of the third quarter, although such an expansion would have been only ‘modest’ and the weakest since January.
‘The euro area is heading for a standstill. After the impact of the Olympics temporarily boosted the economy of France, the eurozone’s heavyweight, the composite PMI index fell in September at the fastest pace in 15 months,’ summed up Hamburg Commercial Bank chief economist Cyrus de la Rubia. ‘The manufacturing sector is getting more complicated by the month.
The slowdown has now reached its 27th month and even worsened in September. Looking ahead, the sharp fall in new orders and companies‘ increasingly gloomy outlook for future business activity suggest that this lean period is far from over,’ he added. De la Rubia has indicated that the moderation in services inflation may be ‘welcome’ from the European Central Bank (ECB), although the ‘quasi-parallelisation’ of the sector as a whole could lead to a cut in interest rates in October.
