Euro zone business activity contracts in September

The preliminary euro zone composite Purchasing Managers’ Index (PMI), compiled by Hamburg Commercial Bank (HCOB) and S&P Global, reached an eight-month low of 48.9 from August’s 51. (The 50 point mark separates business activity growth from contraction.)

The indicator of business activity for manufacturing sank deeper into negative territory in September – the index dropped to a nine-month low of 44.8 points. This development took place against the backdrop of a continued decline in new orders, which fell in September at the fastest pace since January.

The most visible contribution to the downturn in the euro zone’s manufacturing came from Germany, where the manufacturing PMI fell to a one-year low of 40.3 from August’s 42.4.

Amid the heavier slump in manufacturing, the moderate optimism of German manufacturers reported by S&P Global in August has turned into what they call ‘the steepest pessimism in a year’. HCOB predicts a technical recession in Germany – the country’s GDP will decrease by 0.2% in the third quarter following a drop by 0.1% in the first quarter.

The euro zone services PMI remained in the positive territory in September, although the activity expanded at the slowest pace in seven months – the index dropped to 50.5 from 52.9 points in August.