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Financial News: Eurozone Private Sector Growth Weakens On Manufacturing

Eurozone Private Sector Growth Weakens On Manufacturing

09/21/2018 - 07:57:00 (RTTNews)

(RTTNews) - Eurozone private sector grew at the second-weakest pace since late-2016 as manufacturing growth was subdued by stagnating export orders, flash survey data from IHS Markit showed Friday.

The composite output index fell to 54.2 in September, while the score was forecast to remain unchanged at 54.5. Although the reading was well above the 50.0 no-change level, it was the lowest since November 2016 with the exception of last May.

The slowdown was driven by weaker growth in the manufacturing sector as export orders failed to grow for the first time since June 2013. Meanwhile, the service sector output growth picked up momentum for a second successive month to reach a three-month high.

The manufacturing Purchasing Managers' Index dropped to a 24-month low of 53.3 from 54.6 a month ago. The score was expected to fall slightly to 54.5.

Meanwhile, the services PMI rose to a three-month high of 54.7 in September. The indicator was expected to remain at 54.4.

Chris Williamson, chief business economist at IHS Markit, said, "A near stagnation of exports contributed to one of the worst months for the Eurozone economy for almost two years."

"Trade wars, Brexit, waning global demand (notably in the auto industry), growing risk aversion, destocking and rising political uncertainty both within the Eurozone and further afield all fueled the slowdown in business activity," Williamson added.

The fall in composite PMI adds to evidence that the region's economy has lost some momentum after 2017's very strong expansion, Jessica Hinds, an economist at Capital Economics, said.

As the score is still consistent with a decent pace of growth, the European Central Bank is unlikely to change its plans to normalize policy very gradually, the economist noted.

Across the region, growth slowed in Germany and France but both continued to outperform the rest of the Eurozone as a whole.

Germany's private sector growth moderated from a six-month high in September. The composite output index fell to 55.3 from a six-month high of 55.6 in August.

Nonetheless, the latest reading was still the second-best seen since February. The expected reading was 55.4.

Data showed a contrast in performance between the two main areas of the German economy, with services gaining growth momentum and overtaking a slowing manufacturing sector.

The services PMI improved to 56.5 from 55.0 in August. The score was expected to remain unchanged at 55.0.

Meanwhile, the factory PMI declined to a 25-month low of 53.7 from 55.9 in the previous month. Economists had forecast the indicator to drop slightly to 55.7.

Elsewhere, France's private sector expanded at the weakest pace in 21 months in September, amid weaker gains in both manufacturing and service sectors.

The composite output index came in at 53.6, down from 54.9 in August. The reading was lower than the 54.6 economists had expected.

The manufacturing PMI fell to a three-month low of 52.5 from 53.5 in August. Economists had forecast a score of 53.3.

Many manufacturers saw a reduction in demand from the automotive sector and some firms reported a contraction in new export orders during September.

The services PMI declined to a four-month low of 54.3 from 55.4. Economists were looking for a 55.3 reading.

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