Business activity in the euro area declined in September

Business activity in the eurozone unexpectedly declined in September. This is evidenced by the results of a recent study, according to Reuters.

As noted, the service industry, which dominates the bloc, has come to a standstill, and the decline in industry has also accelerated. The German economy, Europe’s largest, is likely to be in recession, while the French economy has returned to contraction after an August Olympics-related upturn.

The preliminary composite Eurozone Purchasing Managers’ Index (PMI) compiled by S&P Global fell to 48.9 in September, down from 51.0 in August. For the first time since February of this year, it is below 50, which separates growth from recession. A Reuters poll predicted a moderate decline to 50.5.

According to Bert Colin, an economist at ING, with the end of the Olympics, optimism in the eurozone has faded, and the August increase in the PMI index was followed by a sharp drop in September. This further heightens concerns about growth in the bloc amid weakening inflation.

Germany’s economy contracted by 0.1% in the second quarter, and a survey on September 23 showed that it continued its decline in the third quarter. Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, notes that a technical recession seems to be already in place and predicts that the German economy will decrease by 0.2% in July-September.

At the same time, price pressures are easing, and analysts do not rule out a cut in the ECB’s deposit rate in October this year.

The Eurozone manufacturing PMI, which has been below 50 for more than two years and was forecast at 45.6, fell to 44.8 in September from 45.8 in August. The manufacturing index fell to 44.5 from 45.8.

Business optimism declined, indicating that purchasing managers do not expect the situation to improve soon. This month, the index of future production fell to an 11-month low of 52.0 from 57.5 in August.

As GMK Center reported earlier, the ECB cut all three key interest rates at its meeting on September 12. The deposit rate was cut by 25 basis points and now stands at 3.5%. The regulator emphasized that it will continue to monitor the incoming statistical data and make decisions on rates at each meeting separately.