Eurozone Private Sector Stagnates On Virus Resurgence

Following the resurgence of the coronavirus infection rates, the euro area private sector stagnated in September as faster growth in manufacturing was offset by a renewed downturn in the service sector, flash survey data from IHS Markit showed Wednesday.

The composite output index declined to 50.1 in September from 51.9 in August. Economists had forecast the reading to drop to 51.7.

Having rebounded in July and August from Covid-19 lockdowns during the second quarter, the PMI has since indicated a near stalling of the economy as rising infection rates and ongoing social distancing measures curbed demand.

Today’s data suggest that the recovery is grinding to a halt, with activity in the services sector probably contracting, Jessica Hinds, an economist at Capital Economics, said.

And with some governments now imposing additional, stricter restrictions, there is a clear and growing risk that it goes into reverse, at least in the countries worst affected by the virus, the economist added.

Manufacturing output growth accelerated in September to the fastest since February 2018, while services recorded the largest contraction of output since May.

At 53.7, the manufacturing Purchasing Managers’ Index hit a 25-month high. Economists had forecast the reading to rise to 51.9 from 51.7 in August.

The services Purchasing Managers’ Index dropped to a four-month low of 47.6, while the score was forecast to remain unchanged at 50.5 in August.

Germany continued to lead the recovery in September driven by a sharp rise in manufacturing output. The composite output index dropped more-than-expected to 53.7 in September from 54.4 in August. The expected reading was 54.1.

The survey showed a continued loss of momentum in the recovery from the covid-19 shutdown. Following increases in each of the previous two months, the service sector shrank in September.

The flash services PMI fell to 49.1 from 52.5 a month ago. The reading was forecast to rise to 53.0.

Meanwhile, the manufacturing PMI rose to a 26-month high of 56.6 from 52.2 in August. Economists had forecast the index to climb to 52.5.

On the other hand, the French private sector activity deteriorated for the first time in four months in September due to the renewed disruption related to the pandemic.

The flash composite output index declined unexpectedly to 48.5 from 51.6 in August. The score was expected to rise to 51.9.

The flash services PMI came in at 47.5, while it was expected to remain unchanged at 51.5. Meanwhile, the factory PMI rose to 50.9 from 49.8 a month ago. This was above the consensus of 50.5.

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