Eurozone economy loses momentum, survey shows

Posted on September 23, 2016

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The eurozone’s recovery appears to have lost some of its steam, with an important measure of activity falling to its lowest level in more than a year-and-a-half in September.

The flash purchasing managers’ index for the single currency area fell to 52.6, from 52.9 in August, with the decline driven by a slowdown in the region’s dominant services sector. The index, compiled by data company IHS Markit, remains about the crucial 50 level that marks an expansion in activity.

    “While the underlying picture remains one of sluggish growth of close to 0.3 per cent over the quarter as a whole, it also remains clear that the economic upturn is still fragile and failing to achieve any real traction,” said Rob Dobson, senior economist at IHS Markit.

    The reading is the lowest in 20 months.

    Companies that performed well within the single currency area were lifted by stronger demand

    A separate index for manufacturing hit a three-month high, with companies in this area supported by strong orders for exports. Orders here hit their highest level for two-and-a-half years.

    [Results suggest] it is the domestic side of the economy that is slowing, more than the externally-orientated manufacturing sector

    – Dominic Bryant, senior European economist at BNP Paribas

    Service sector companies rely much more on demand from within the eurozone. Dominic Bryant, senior European economist at BNP Paribas, said the contrast in the results of the two sectors “suggests it is the domestic side of the economy that is slowing, more than the externally-orientated manufacturing sector”.

    Up until now the eurozone’s recovery has been driven mostly by strong domestic demand, with high levels of consumption supporting growth within the bloc.

    There was also a reversal in the fortunes of the eurozone’s two largest economies, France and Germany. The German economy, the region’s largest, has consistently outperformed France in recent years. But in September France recorded its highest reading since June 2015, while the German figure fell to a 16-month low.

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