Business activity in the eurozone has fallen into the contraction territory as the third quarter concluded, highlighting a deterioration in new orders and overall business amidst a significant downturn in the manufacturing sector. The euro area's flash composite PMI recorded a value of 48.9 in September, a drop from 51 in the preceding month, as reported by S&P Global and Hamburg Commercial Bank.
This recent figure is notably below the consensus estimate of 50.6, marking an eight-month low for the index. With business confidence plummeting to a ten-month low, the eurozone has experienced a pronounced decrease in new orders as well as volumes of outstanding business. Inflation in terms of both input costs and output prices has shown signs of slowing, attributed to weaker demand conditions in the market. Hamburg Commercial Bank Chief Economist Cyrus de la Rubia commented on the situation: "The eurozone is heading towards stagnation.
Following the temporary boost from the Olympic effects that benefitted France, one of the eurozone's largest economies, the Composite PMI witnessed its most significant drop in 15 months during September. The index has now fallen below the critical expansionary threshold." The manufacturing sector has recorded its most severe slump in production to date in 2024, with the main index plummeting to a nine-month low of 44.8, in comparison to the previous 45.8, and also below the anticipated 45.6.
Similarly, the manufacturing output index fell to a nine-month low of 44.5 from 45.8. This downturn, now extending for a consecutive 18 months, has been substantially driven by declines noted in economies such as Germany and France. De la Rubia further explained that, "Manufacturing is becoming increasingly chaotic each month.
The recession has been ongoing for 27 months, and the situation worsened in September. Looking ahead, the significant decrease in new orders coupled with companies' grim outlook for future production indicators suggest that this challenging period is far from over." In a related area, the eurozone services sector's flash PMI reflected a slight easing to a seven-month low of 50.5, descending from 52.9 in August and falling short of analyst predictions, which had anticipated a figure of 52.1.
This latest reading suggests the slowest pace of expansion observed since February..