By Daniel Hunter
The eurozone economy continued to struggle in September, according to a series of closely watched surveys.
A variety of Purchasing Managers Index (PMI) surveys conducted by Markit showed more slowing growth in the eurozone's industries.
Eurozone composite output fell to 52.3, which is down from August's 52.5 and a nine month low. Services activity was down from 53.1 to 52.8, a three month low. Manufacturing growth continued to be particularly sluggish, falling from 50.7 to a 14-month low of 50.5. Finally, manufacturing output was unchanged at 51.
It's important to remember that any figure above 50 indicates growth, and so each of these aspects are growing. But, with the exception of manufacturing output, the pace at which they are growing is slowing down.
Inflows of new orders rose only modestly, with the rate of increase waning for the third successive month to register the smallest monthly improvement since August of last year.
Employment was largely unchanged once again as companies held back from hiring extra staff due to the weak sales growth. Although payrolls have risen in each of the past six months, gains have been only marginal at best.
With backlogs of work falling in September at the steepest rate since July of last year, the survey suggests companies will continue to have little need to boost payroll numbers in October.
Inflationary pressures remained subdued in the face of weak demand. Companies’ selling prices fell again, albeit only marginally, while input costs rose at the weakest rate since May.
Germany vs France
There was also a widening gap between the performance of the eurozone's two largest economies, Germany and France.
France's private sector output is slowing down again, whilst Germany's is growing at a faster rate. But it wasn't all good news for the Germans, with manufacturing slowing.
Chris Williamson, Chief Economist at Markit said: “The survey paints a picture of ongoing malaise in the eurozone economy. With growth of output and demand slowing, employment once again failed to show any meaningful increase. Such torpor meant prices continued to fall as firms fought for customers, which will inevitably heighten concerns that the region is facing deflation.
“For a central bank hoping that the economic data flow will start to improve, the ECB will be disappointed by the ongoing weakness of the PMI. The survey data suggest GDP is on course to grow by 0.3% at best in the third quarter, buoyed by a 0.4% expansion in Germany but dragged down by stagnation in France and sluggish growth in the rest of the region.
“There are also worrying signs that growth could slow further in the fourth quarter. Inflows of new orders in the manufacturing sector are declining again, dropping for the first time in 15 months, and business expectations about the year ahead turned down in the services sector, led down by a slump in confidence in Germany."
Chris Williamson also suggested that the ongoing crisis in Ukraine is continuing to have an impact on the eurozone.
He said: “Concerns about the Ukraine crisis, related Russian sanctions and worries about the single currency area’s general economic plight appear to be having an increased impact on the eurozone economy. The danger is that the ECB’s efforts to stimulate the economy will prove ineffective in the face of such headwinds, which are exacerbating already-weak demand.”
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