Preliminary results from the S&P Global survey, published on Monday, show that economic activity in the Eurozone saw a significant and unexpected contraction in September. The services sector, which dominates the economy, experienced a notable decline, while the downturn in the manufacturing sector intensified. The Purchasing Managers’ Index (PMI) fell to 48.9 points, dropping below the critical 50-point threshold that separates economic expansion from contraction. Analysts had forecast a smaller drop to 50.5 points, agencies Bloomberg and Reuters report.
Germany, the Eurozone’s largest economy, suffered the sharpest decline, while France returned to contraction after benefiting from a boost in August linked to the Olympic Games.
Cyrus de la Rubia, an economist at Hamburg Commercial Bank, said: “The Eurozone is heading towards stagnation, and with the rapid fall in new industrial orders, further deterioration seems inevitable.”
The Eurozone’s GDP, which began to decline in the second quarter, remains under pressure as consumer spending remains subdued despite easing inflation and rising wages. Weak external demand, particularly from China, is straining manufacturing activity.
Germany’s industrial sector, facing structural challenges and increasing competition from China, saw its PMI fall further to 47.2 points in September.
The labor market is also expected to worsen, with manufacturing companies reducing staff, although employment in the services sector continues to rise.
