Growth of the eurozone’s private sector slowed
further towards stagnation in September. The IHS
Markit Eurozone PMI® Composite Output Index
slipped to a three-month low of 50.4, down from
August’s 51.9 and indicative of only a marginal
expansion. The final reading was, however, firmer
than the earlier flash estimate (50.1).
The composite PMI belied a two-speed economy
during September. Led by a strongly performing
Germany, overall regional manufacturing output rose
at the fastest pace for over two-and-a-half years. In
contrast, service sector activity slipped back into
contraction by registering its worst performance
There was some notable divergences in activity at
the country level during September. On the one
hand, Germany recorded a marked rate of growth,
with its performance far outstripping the rest of the
region. Italy was the only other nation to record
expansion, although the gain here was marginal.
France and Ireland meanwhile slipped back into
contraction, whilst a sharp deterioration in services
activity weighed heavily on Spain’s private sector
Incoming new business in the eurozone increased
only slightly during September, and at the slowest
rate in the current three-month period of growth.
‘“With the eurozone economy having almost stalled
in September, the chances of a renewed downturn
in the fourth quarter have clearly risen.
“Spain has been especially hard-hit as rising Covid19 case numbers led to further disruptions to daily life. With the exception of the March-to-May period
at the height of the first wave of infections, Spain’s
service sector contraction in September was the
largest recorded since November 2012.
“However, renewed service sector downturns were
also recorded in France and Ireland, while a nearstalling was recorded in Germany, underscoring the broad-based geographical spread of the worsening
service sector picture. Virus containment measures
remained particularly strict in both Spain and Italy
during September, and were also tightened in
France and Germany.
Much will depend on whether second waves of virus
infections can be controlled, and whether social
distancing restrictions can therefore be loosened to
allow service sector activity to pick up again.
Governments will also need to be vigilant in
providing timely support to sustain recoveries,
alongside increasingly accommodative monetary
In terms of the latter, inflationary pressures
remained low in September, keeping the door open
for loose policy. Any further deterioration of the PMI
numbers as we head through the fourth quarter will
add further weight to calls for more stimulus.”