BS: Euro Area Suffers Unexpected Slowdown From Factories to Services
Euro-area manufacturing and services growth unexpectedly slowed in September to the weakest pace this year, adding to signs that the economy is faltering.
Purchasing Managers Indexes for both industries fell and a composite gauge dropped to 52.3 from 52.5 in August, London-based Markit Economics said today. Economists had predicted an unchanged reading of 52.5, according to a Bloomberg News survey.
Economic expansion in the currency bloc halted in the second quarter as the region’s three largest economies failed to grow and inflation fell to the lowest level in almost five years. European Central Bank President Mario Draghi said yesterday that the euro area recovery is losing momentum.
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“The survey paints a picture of ongoing malaise in the euro zone economy,” said Chris Williamson, an economist at the London-based company. “Prices continued to fall as firms fought for customers, which will inevitably heighten concerns that the region is facing deflation. There are also worrying signs that growth could slow further in the fourth quarter.”
Today’s data suggest gross domestic product will grow 0.3 percent this quarter, dragged down by stagnation in France and sluggish growth in the rest of the region, Williamson said. Earlier Markit released indexes showing manufacturing and services shrank in France, while in Germany factory growth slowed to the least in 15 months.
A gauge of new orders for the euro area slipped to 51.2 this month, from 52.4 in August, the data showed. An index of services growth slowed to 52.8 from 53.1 and manufacturing fell to 50.5 from 50.7.
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More Stimulus
The ECB cut rates and announced purchase plans of asset-backed securities and covered bonds this month, in its latest stimulus move aimed at boosting inflation that has been below 1 percent since October. Draghi said yesterday that policy makers can implement more stimulus if required.
Risks to growth in the currency bloc “are clearly on the downside,” Draghi told lawmakers in Brussels. “Recent indicators gave no indication that the sharp decline” in economic activity in the region has stopped, he said.
Confidence declined in recent months as tensions with Russia threatened trade. The Munich-based Ifo institute’s business climate index for Germany, due for release tomorrow, will probably show sentiment at companies fell to the lowest in 16 months in September.
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“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 euro zone economy,” Williamson said. “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.”
Companies’ selling prices fell in September, the Markit data showed, while input costs rose at the weakest rate since May. Figures last week showed that euro-area inflation held at 0.4 percent in August, the weakest pace in almost five years. That compares with the ECB’s goal of just below 2 percent.
