Private-sector activity in the Eurozone is showing signs of further contraction, indicating that the area’s economy is likely to decline in the third quarter. Data compiled by S&P Global reveals that the downturn in manufacturing has deepened, contributing to the shrinking of private-sector activity.
The flash Composite Purchasing Managers’ Index (PMI) for the Eurozone, a measure reflecting overall economic health, increased slightly to 47.1 in September from August’s 33-month low of 46.7. However, economists caution that the reading remains below the 50 level that signifies contraction, suggesting that the Eurozone will not experience growth in the near future.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, describes the PMI services numbers in the Eurozone as painting a grim picture. He states that the bank expects the region to enter a contraction in the third quarter, projecting a 0.4% drop compared to the second quarter based on their nowcast, which incorporates the PMI indices.
Data shows that output in the Eurozone has been declining for four consecutive months, primarily due to the worsening decline in manufacturing. De la Rubia highlights that the main drag on the economy continues to come from manufacturing, where the order situation has further deteriorated.
The PMI readings for September indicate negative figures for both manufacturing, which has remained below 50 for 15 months, and services. S&P Global suggests that Germany and France, the largest economies in the European Union (EU), have been the main drivers of the prolonged downturn in the euro area’s business activity, despite expectations of some stabilization.
This continued contraction raises concerns about the overall health of the Eurozone’s economy and its ability to rebound from the current downturn. Economists and market analysts will closely monitor future PMI data for any signs of improvement or indications of a deepening decline. The performance of key sectors, such as manufacturing and services, will play a crucial role in determining the trajectory of the euro area’s economic recovery.
These developments in the Eurozone’s private-sector activity highlight the challenges that the region faces in achieving sustained growth. Efforts to address the underlying issues affecting manufacturing and business activity will be vital to stimulate economic expansion and stability in the Eurozone.
As the largest economies within the EU, Germany and France will have a significant influence on the overall trajectory of the euro area’s economy. It remains crucial for policymakers and stakeholders to closely monitor and address the factors contributing to the prolonged contraction in order to facilitate a more robust and resilient economic recovery.
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