The end of the third quarter saw a further easing in the rate of eurozone economic expansion. September saw combined output across the manufacturing and service sectors rise at the slowest pace since January 2015.
The flash estimate of Markit’s Eurozone PMI® Composite Output Index slipped to 52.6, down from 52.9 in August, a 20-month low. The average index reading over the third quarter (52.9) is below that of quarter two (53.1), also suggesting that the economy is losing, rather than gaining, momentum.
Looking beneath the headline figure highlighted contrasting growth trends at manufacturers and service providers. Service sector business activity increased at the weakest rate since the end of 2014, whereas manufacturing production expanded at the quickest pace since December of last year.
Manufacturers benefitted from faster growth of both total new orders (three-month high) and new export business. The gain in new export orders was the steepest in two-and-a-half years.
Service sector order books meanwhile rose at a pace unchanged from August’s 19-month low. The outlook for the service economy also weakened, with optimism regarding levels of activity in 12 months’ time dipping to a 21-month low.
By nation, output growth eased to a 16-month low in Germany, mainly reflecting a sharp slowdown in the service sector. France, meanwhile, registered its fastest rate of economic expansion since June 2015, and outperformed Germany for the first time in over four years. Growth at French service providers hit a 15-month high in September, more than offsetting a further stagnation of manufacturing production. The overall rate of expansion outside of the ‘big-two’ nations moderated to a 21-month low.
The pace of job creation across the currency union also wavered at the end of the third quarter. September saw employee numbers rise at the slowest pace since April, with the rate of increase identical to the average for the current 23-month sequence of expansion. Jobs growth accelerated at manufacturers, but slowed at service providers.
German employment rose at a slightly improved pace compared to August, while staffing levels increased in France following cuts in the prior month. Job creation cooled outside of the ‘big-two’ nations to its lowest since September 2015.
Inflationary pressures remained relatively muted during September, but showed some tentative signs of increasing nonetheless. Average costs rose for the sixth month running (and at a faster pace than in August), although the rate of increase was still well below the long-run survey average. Meanwhile, average selling prices rose for the first time in 13 months, but only negligibly.
While the underlying picture remains one of sluggish growth of close to 0.3% over the quarter as a whole, it also remains clear that the economic upturn is still
fragile and failing to achieve any real traction.