The Eurozone’s service sector contracted yet again in September making the prospect of a deep recession inevitable for the region.
Markits latest PMI for the European service sector slid from 47.2 in August to 46.1 in September, marking its worst performance in more than three years. With the regions manufacturing PMI also being at its lowest level for three years, today’s services figures paint a grim picture for the single currency area.
Once again France was among one of the worst performing nations, its services PMI tumbled to 45.0 in September, down from 49.2 in August.
Jack Kennedy, senior economist at Markit, said:
“The French service sector sank further into contraction in September, mirroring the trend in manufacturing. The weak PMI data suggest it is highly unlikely that French GDP will have avoided slipping into decline in Q3. The disappointing news on business activity was accompanied by an accelerated rate of job cutting, which points to further labour market weakening following last week’s news that unemployment has risen above three million.”
Any figure below 50 indicates contraction and Europe’s PMI’s have been stuck on the wrong side of that number for the past year. Orders for manufactured goods declined at its fastest pace in three years. Economists are becoming increasingly risk averse to the single currency bloc as once again doubts creep in over the region. Many economists believe that the European economy is in worse shape than they previously thought. Spain continues to be the big concern as its latest services PMI showed that fell to 40.2 in September, from 44 in August. This is well below the 50 level that divides growth from contraction, and representing the sharpest fall since November 2011.
This week’s economic data indicates that the suggested aggressive action undertaken by the European Central Bank over the last two months has already failed in its attempts to lift the economy.
“Rather than clearing, the cloud of uncertainty hanging over business investment and spending got notably darker in September,” said Chris Williamson, chief economist from Markit, which compiles the data. There therefore seems little scope for a return to growth in the fourth quarter. The uncertainty is perhaps whether policymakers will be able to induce an improvement in business and consumer confidence to help ease the rate of decline, or whether the pace of downturn will accelerate further towards the end of the year.”
The Pound to Euro exchange rate is currently trading at 1.2466
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