• Prior 49.8
  • Manufacturing PMI 48.5 vs 48.7 expected
  • Prior 49.6
  • Composite PMI 48.2 vs 48.2 expected
  • Prior 48.9

The euro area economic contraction deepened in September with the services reading coming in at a 19-month low, manufacturing at a 27-month low, and composite at a 20-month low. The rate of decline, if you exclude the pandemic lockdowns, was the steepest since 2013. Ouch. S&P Global notes that:

“A eurozone recession is on the cards as companies report worsening business conditions and intensifying price pressures linked to soaring energy costs.

“The early PMI readings indicate an economic contraction of 0.1% in the third quarter, with the rate of decline having accelerated through the three months to September to signal the worst economic performance since 2013, excluding pandemic lockdown months.

“Germany is facing the toughest conditions, with the economy deteriorating at a rate not seen outside of the pandemic since the global financial crisis.

“With demand slumping and companies growing increasingly pessimistic about the outlook, the survey’s forward-looking indicators point to a steepening economic decline for the eurozone in the fourth quarter, adding to the likelihood of the region falling into recession.

“Although there were some signs of supply chain constraints easing, the focus of concern has clearly shifted away from supply chains to energy and the rising cost of living, which is not only hitting demand but also limiting manufacturing production and service sector activity in some cases.

“The surge in energy costs has meanwhile reignited inflationary pressures which, having shown some signs of cooling in prior months amid easing supply shortages, have reaccelerated.

“The challenge facing policymakers of taming inflation while avoiding a hard landing for the economy is therefore becoming increasingly difficult.”