Euro zone private sector activity contracted again in September, suggesting further weakening of the economy, according to a survey compiled by S&P Global on Monday.
The HCOB Flash Composite Production Index fell to 48.9 in September from 51.0 in August, the lowest level in eight months and below expectations of 50.6.
The decline in overall business activity was driven by a worsening deterioration in manufacturing activity, with output declining for the 18th consecutive month.
Services sector activity continued to expand, but the pace of growth was the slowest since February.
The manufacturing purchasing managers’ index fell to 44.8 in September, the lowest in nine months, from 45.8 in the previous month. The index had been expected to fall to 45.7.
The services PMI for September was 50.5, down from 52.9 in August and well below the forecast of 52.3.
Total production fell for the first time in seven months amid a sustained decline in new orders. New business fell at the sharpest pace since January.
A decline in new orders, a sharp drop in outstanding business volumes and business confidence at its lowest in 10 months have led companies to cut staff numbers for a second consecutive month.
Weak demand helped moderate inflation in both input costs and output prices.
France’s private sector contracted again after an Olympics-related surge in activity, joining Germany in seeing the sharpest decline since February.
“The ECB is closely monitoring persistently high inflation in the services sector, so the news that both input and output price inflation have slowed is certainly welcome,” said Cyrus de la Rubia, chief economist at Hamburg Merchant Bank.
“And given the deepening manufacturing downturn and the services sector remaining almost at a standstill, further rate cuts are quite possible in October, although markets are not yet expecting them,” de la Rubia added.
