2019.09.2307:51:00UTC+00Eurozone Private Sector Growth Closer To Stagnation

The euro area private sector moved close to stagnation in September as demand for both goods and services declined the most in over six years, survey data from IHS Markit showed Monday.

The flash composite output index fell unexpectedly to a 75-month low of 50.4 in September from 51.9 in August. Economists had forecast the score to rise slightly to 52.0.

Nonetheless, a score above 50 indicates expansion in the sector. The reading signaled the weakest growth across manufacturing and services since June 2013.

The Purchasing Managers' Index for services slid more-than-expected to 52.0 from 53.5 in August. The expected reading was 53.0.

Suggesting the steepest downturn since 2012, the manufacturing PMI declined further, to 45.6 from 47.0 in the previous month. The score was forecast to rise to 47.5.

The survey data indicates that GDP looks set to rise by just 0.1 percent in the third quarter, with momentum weakening as the quarter closed, Chris Williamson, chief business economist at IHS Markit, said.

Today's PMI data thus suggest that a recession is approaching in the euro zone, Ralph Solveen, an analyst at Commerzbank, said.

Elsewhere, the economic bulletin from the European Central Bank said the decline in euro area industrial production growth was driven by both global trade tensions and domestic developments.

Global trade tensions and factors associated with developments in China, the UK and the US accounted for 37 percent of the fall in euro area industrial production growth, the report said. Meanwhile, domestic factors contributed 63 percent, although part of this effect may reflect temporary factors, the bank added.

The IHS Markit survey showed that new orders for goods and services declined for the first time since January and backlogs of work decreased for the ninth time in over the past ten months.

Further, firms' expectations for the year ahead remained stuck at one of the lowest levels since 2012 due to ongoing trade wars, geopolitical stress, notably Brexit.

Employment increased at the slowest pace since January 2015 with the rate of job creation easing for a third consecutive month.

On the price front, the survey showed that average prices charged for goods and services logged the weakest rise since October 2016. At the same time, input cost inflation hit the lowest since August 2016.

By country, Germany saw output fall for the first time since April 2013, with the rate of decline hitting the steepest since October 2012.

Germany's flash composite PMI declined to 49.1 from 51.7 in August. The services PMI fell to a 9-month low of 52.5 and the factory PMI plunged to a 123-month low of 41.4 compared to 43.5 in August.

At the same time, growth of both output and new orders slowed to four-month lows in France. The composite output index slid to 51.3 from 52.9 in the previous month.

The services PMI dropped to 51.6 from 53.4 a month ago. Likewise, the manufacturing PMI eased to 50.3 from 51.1 in August.