The eurozone economy is close to stalling, dragged down by a steep drop in German manufacturing activity, according to a key survey of business executives that hit European markets and prompted predictions of imminent recession.
The purchasing managers’ index for the eurozone fell to a sixyear low of 50.4 in September, below forecasts and down from 51.9 in August. The figures, produced by IHS Markit, offer a closely watched snapshot into private sector activity. A reading below 50 signifies economic contraction.
The euro fell 0.4 per cent against the US dollar and European stock markets fell after the data were released on Monday. The panEuropean Stoxx 600 index was down almost 1 per cent, while Germany’s blue-chip Dax index fell 1.5 per cent.
“Today’s figures confirm one thing in any case: there will be no noticeable improvement in the economy this year,” said Ralph Solveen, economist at Commerzbank. “On the contrary, the risk of a recession is increasing.”
The European Central Bank cited slowing economic growth in the eurozone as one of the reasons for cutting interest rates further into negative territory and restarting its programme of bond-buying this month. But most economists are sceptical that the ECB’S loosening policy will do much to restore growth.
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“The ECB is right to keep an accommodating policy stance, but its recent package will not make much difference and certainly won’t help the German car sector whatsoever,” said Dirk Schumacher, head of European macro research at Natixis.
The downturn in Germany’s critical manufacturing sector has deepened dramatically in September, dragging its wider economic activity to the lowest level since the depths of the eurozone crisis, according to a key survey of business executives.
The PMI for German manufacturing fell to 41.4 in September, from 43.5 the previous month, slumping to its lowest level since mid-2009. The figures underline how trade tensions, problems in the car industry, and Brexit uncertainties are weighing on the eurozone’s biggest economy.
