Eurozone composite PMI falls to 48.9 in September
Business activity in the euro zone unexpectedly fell in September, as evidenced by recent survey results, according to Reuters.
As noted above, the EU’s large service sector is stagnating and deindustrialization is accelerating. Germany, Europe’s largest economy, is likely to fall into recession, and France’s economy is shrinking again after an Olympics-related bounce in August.
The euro zone’s composite purchasing managers’ index (PMI) compiled by S&P Global fell to 48.9 in September from 51.0 in August, the first time it has fallen below the 50 mark that separates expansion from recession since February. A Reuters poll had forecast a modest decline to 50.5.
Bert Collin, an economist at ING, said optimism in the euro zone faded with the end of the Olympics and PMI readings fell sharply in September after rising in August, raising further concerns about euro zone growth amid weakening inflation.
The German economy contracted 0.1% in the second quarter, and a survey released on Sept. 23 showed it continuing to fall in the third quarter. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said a technical recession appears to have already begun and forecast the German economy would shrink 0.2% in the July-September period.
At the same time, price pressures are easing and analysts do not rule out the possibility of a cut in the ECB’s deposit rate in October this year.
The euro zone’s manufacturing PMI has been below 50 for more than two years and was forecast at 45.6, but actually fell to 44.8 in September from 45.8 in August. The manufacturing index fell to 44.5 from 45.8.
Business optimism has waned, suggesting purchasing managers don’t think conditions will improve anytime soon. The index of future production fell to an 11-month low of 52.0 this month from 57.5 in August.
As GMK Center previously reported, the ECB cut all three key interest rates at its meeting on September 12. The deposit rate was cut by 25 basis points and now stands at 3.5%. The ECB stressed that it will continue to monitor incoming statistical data and decide on interest rates separately at each meeting.
