Eurozone economy edging toward recession – S&P survey

Output in the euro area has been shrinking for four consecutive months

The Eurozone’s economy shrank in the third quarter, with demand falling at the fastest pace in almost three years last month, Reuters reported on Wednesday, citing data compiled by S&P Global.

HCOB’s final Composite Purchasing Managers’ Index (PMI) for the bloc, a measure reflecting overall economic health, rose slightly to 47.2 in September from August’s 33-month low of 46.7. The figure remained below the 50 level which indicates a contraction.

Output in the Eurozone has been shrinking for four consecutive months, led by a deepening decline in manufacturing. The S&P survey shows that output declined in the services sector as well.

Official data showed on Wednesday that retail sales in the euro area dropped more than expected in August, in a sign of weaker consumer demand amid high inflation. Meanwhile, September’s composite new business index, which monitors overall demand, plunged to the lowest level since November 2020.

“The drop in retail sales in August and weakness in the final PMIs for September are consistent with our view that the Eurozone economy will fall into recession in the second half of 2023,” Franziska Palmas at Capital Economics said, as quoted by Reuters.

READ MORE: Germany at risk of becoming ‘Sick Man of Europe’ – Deutsche Bank

A separate survey reportedly showed that manufacturing activity across the 20-member bloc sharing the euro remained in a broad-based downturn last month amid plummeting demand.

On the positive side, the employment index for services firms was up to 51.5 from 50.4, according to S&P data.

“There is still a frenzy for workers in the services sector. Indeed, Eurozone firms bulked up their teams at a faster pace than in August. That is a head-turner, considering new business is in the doldrums,” Cyrus de la Rubia from Hamburg Commercial Bank told Reuters.

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