The Eurozone economic downturn deepened in September with worsening performances in both manufacturing and services with demand easing sharply as a result of the cost of living crisis, flash survey results from S&P Global showed Friday.
The flash composite output index declined to a 20-month low of 48.2 in September from 48.9 in the previous month. The reading came in line with expectations.
The score has remained below the neutral 50.0 mark for the third straight month signaling a continual economic contraction throughout the third quarter. Excluding the pandemic shocks, the latest score was the weakest since May 2013.
Among sectors, manufacturing led the downturn, with factory output falling for a fourth straight month. At 48.5, the manufacturing Purchasing Managers’ Index fell to a 27-month low from 49.6 a month ago. The reading was forecast to decline to 48.7.
At the same time, the service sector contracted at a rate not seen since February 2021. The corresponding PMI came in at 48.9 versus from 49.8 in August. The expected level was 49.0.
At composite level, new orders for goods and services declined sharply for a third straight month. Similarly, backlogs of uncompleted orders fell at a steepening rate, down for a third month in a row.
Employment growth remained unchanged in September from August, which was the lowest for 17 months.
On the price front, the survey showed that input cost accelerated across manufacturing and service sectors. The overall increase in costs was the steepest since June. Prices charged for goods and services also accelerated the most since June as firms tried to protect margins.
Business expectations for the coming year slumped sharply to the weakest since May 2020. The gloomy outlook principally reflected concerns over soaring energy prices and the detrimental impact of rising inflation on firms’ costs and customer demand.
A eurozone recession is on the cards as companies report worsening business conditions and intensifying price pressures linked to soaring energy cost, Chris Williamson, chief business economist at S&P Global Market Intelligence said.
The challenge facing policymakers of taming inflation while avoiding a hard landing for the economy is becoming increasingly difficult, Williamson added.
By country, Germany’s private sector economy slipped deeper into contraction in September on increased energy costs. The flash composite output index fell to a 28-month low of 45.9 in September from 46.9 in the prior month. The reading was the lowest since May 2020.
The deterioration owed to a steep and accelerated decline in service sector activity that was the quickest for 28 months. The services PMI decreased to 45.4 from 47.7 a month ago. The reading was seen at 47.2. The factory PMI came in at 48.3 versus 49.1 in August and the forecast of 48.3.
France’s private sector growth unexpectedly improved in September driven by the services activity. The composite output index rose to 51.2 in September from a 17-month low of 50.4 in August. The reading was forecast to fall to 49.8.
The service sector was the sole driver of the expansion in September, which was in stark contrast to the trend in the manufacturing sector.
The flash services PMI advanced to 53.0 from 51.2 in the previous month. The expected score was 50.5. On the other hand, the manufacturing PMI fell to a 28-month low of 47.8 in September from 50.6 a month ago. The reading was also well below economists’ forecast of 49.8.
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