Eurozone economic downturn deepens in Sept, biz activity contracts

Moreover, the rate of manufacturing decline quickened slightly to the fastest since May 2020. Soaring energy prices also added to companies’ cost burdens and limited production in some cases.

Forward-looking indicators, such as new order inflows, backlogs of work and future output expectations, point to the decline gathering further momentum in coming months.

Worsening performances were seen in both manufacturing and services, with demand falling at steepening rates in each sector as a result of the rising cost of living and growing gloom about future prospects, pushing survey price gauges higher to indicate a renewed acceleration of inflationary pressures, the financial information and analytics company said in a press release.

The seasonally-adjusted S&P Global eurozone purchasing managers’ index (PMI) composite output index fell from 48.9 in August to 48.2 in September, according to the preliminary ‘flash’ reading based on approximately 85 per cent of usual survey responses.

The PMI has now registered below the neutral 50 level for three successive months, thereby signalling a continual economic decline throughout the third quarter, with the rate of contraction gathering pace in September to reach the fastest since January 2021.

In the past three months, Germany recorded reduced activity, with the composite PMI sinking to 45.9, its lowest since May 2020 and, excluding the pandemic, its weakest since June 2009. Manufacturing output continued to fall across Germany, albeit with the rate of decline moderating, thanks in part to reduced supply chain constraints.

Output rose only modestly in France, with the composite PMI registering 51.2. Although the increase exceeded the near-stalling seen in August, the survey indicated a marked slowing in French growth during the third quarter compared to the second quarter.

An acceleration of service sector growth helped offset a deepening manufacturing downturn in France. French factories reported a drop in output which, barring the initial collapse during closures at the start of the pandemic, was the largest since March 2013.

New orders for goods and services in the Eurozone, meanwhile, fell sharply for a third straight month, the rate of loss accelerating to a pace not seen since April 2013 barring periods of pandemic restrictions. Manufacturing orders fell especially severely.

New business inflows also fell at an increased rate, in both cases declining faster than output to hint at a further acceleration of output losses in October.

Business expectations for the coming year slumped sharply lower, dropping to the weakest since May 2020 and, excluding the pandemic, the lowest since November 2012.

The steepest collapse in confidence was evident in Germany. In contrast, a slight improvement in future sentiment was recorded in France and a comparatively resilient mood was seen in the rest of the region as a whole, albeit in both cases down sharply from earlier in the year.

The gloomy outlook principally reflected concerns over soaring energy prices and the detrimental impact of rising inflation on firms’ costs and customer demand. Higher interest rates, the Ukraine war, and ongoing supply chain shortages were also widely cited, as was a further shift towards destocking in manufacturing, both among producers and their customers.

ALCHEMPro News Desk (DS)