The rate of economic expansion across the eurozone eased to a 20-month low in September. Growth slowed in Germany, Italy, Spain and Ireland to offset a mild acceleration in France.
The final Markit Eurozone PMI® Composite Output Index posted 52.6 in September, down from 52.9 in August and matching the earlier flash estimate. The average index reading during the third quarter as a whole (52.9) was the weakest since the final quarter of 2014.
By sector, output rose at manufacturers and service providers. The rate of expansion in manufacturing production ticked higher and remained above that for service sector business activity for the fourth straight month. Services output growth dipped to a 21-month low.
Ireland and Spain registered the fastest expansions of economic output, despite the rates of increase easing to 39- and two-month lows respectively. Italy saw growth slip to a four-month low. France was the only one of the ‘big-four’ nations to signal an accelerated increase in economic output in September. The improvement in France took its
pace of expansion to a 15-month high and, with growth slowing to a 16-month low in Germany, took it close to that signalled for Germany.The sector dynamics of the trends in the ‘big-two’ nations contrasted noticeably, however. In France, stronger growth in services output more than offset a near-stagnant manufacturing sector. Germany saw manufacturing production expand at an elevated rate, while service sector activity slowed closer to stagnation.
Underlying the latest expansion of eurozone economic activity was a further increase in new business. Although the rate of expansion in order inflows improved to a three-month high, it remained below the average for the current 22-month sequence of growth. Accelerations were signalled at manufacturers and service providers.
Employment rose for the twenty-third consecutive month in September, although the rate of increase was unchanged from August’s three-month low. Solid job creation was seen in Germany, Spain and Ireland, with mild increases in France and Italy.
Average input costs rose for the sixth consecutive month in September. Although the rate of increase remained well below the long-run survey average, it was quicker than in the prior month. Input price inflation accelerated in each of the ‘big-four’ nations.
Average selling charges were unchanged, halting an 11-month sequence of decrease. Germany, Spain and Ireland saw increases, in contrast to further price discounting in France and Italy.
Services
The final Markit Eurozone PMI® Services Business Activity Index fell to a 21-month low of 52.2 in September. This was down from 52.8 in August, but slightly above the earlier flash estimate of 52.1. The headline index has signalled expansion in each of the past 38 months.
Increased output was supported by gains in new business during September. Although the rate of new order growth ticked higher, it remained among the weakest during the current 22-month sequence of expansion. Business optimism also edged higher, but remained below its long-run trend.
By nation, solid increases in business activity were registered in France, Spain and Ireland, although only France reported a stronger expansion than in August. Growth slowed to a 39-month low in Germany, and to the weakest during the current four-month period of increase in Italy. In both cases, rates of expansion were only marginal.
Slower output growth and relatively subdued gains in new orders filtered through to the trend in staff hirings. September saw employment rise at the slowest pace since April. Job creation weakened in Germany, Spain and Ireland, while a stagnation in employment was recorded in Italy. France saw a marginal increase in headcounts.
Service providers faced an increase in average input costs at the end of the third quarter. The rate of inflation accelerated slightly since August, though remained below the long-run survey average.
Average service charges were unchanged in September, following an 11-month sequence of decline. This mainly reflected steep rises in Germany and Ireland, the fastest since February and June respectively. Spain also saw a modest (albeit slower) increase in charges. Output prices continued to fall in France and Italy.
Chris Williamson, Chief Business Economist at IHS Markit:
While the PMI surveys suggest the eurozone economy continued to grow at a 0.3% rate in the third quarter, there are signs that momentum is waning. September’s expansion was the smallest since the start of last year.
