Business activity across the euro zone unexpectedly contracted this month, posting the first decline in seven months due to a continuing drop in new orders, according to provisional forecasts published on Monday by S&P Global and the Hamburg Commercial Bank.
The euro zone’s composite purchasing managers’ index (PMI), which tracks both manufacturing and services, fell to 48.9 in September from 51.0 in August, below the crucial 50-point mark that separates contraction from expansion.
This was the lowest reading since January and well below the consensus forecast of 50.6.
The contraction was driven by a further slowdown in the region’s overall manufacturing sector, which is now in its 18th consecutive month of decline, with the manufacturing PMI dropping to 44.8 from 45.8 in the previous month.
In particular, manufacturing in industrial powerhouse Germany continues to weaken, with the country’s manufacturing PMI, also released on Monday, falling to 40.3, the lowest level in 12 months, from 42.4 the previous month.
Meanwhile, the euro area’s services sector, which has driven overall growth over the past year, weakened slightly, with the PMI falling to 50.5 from the previous 52.9, the lowest level in seven months.
“Firms cut staff numbers for the second consecutive month as new orders and outstanding business volumes fell sharply and business confidence hit a 10-month low. Meanwhile, weak demand led to a slowdown in both input cost and output price inflation,” the survey said.
