Euro Area Private Sector Stuck In Recession

(RTTNews) - Eurozone private sector ended the third quarter with another contraction as weak demand weighed on output across the manufacturing and services sectors, final results of the purchasing managers' survey from S&P Global showed on Wednesday.

The HCOB final composite output index advanced to 47.2 in September from 46.7 in the previous month. Moreover, the score was slightly above the flash 47.1.

At 48.7, the services Purchasing Managers' Index, or PMI, improved from 47.9 in August. The initial estimate for September was 48.4.

Despite the improvement in the PMI readings, the private sector continued to remain in the negative territory.

Total order books declined the most since November 2020. There was a considerable slump in new business in non-domestic markets.

In order to sustain activity, firms turned to their backlogs of work. The work-in-hand was the fastest since June 2020.

Business confidence towards the coming 12 months weakened markedly amid rising concerns towards the demand environment. Growth expectations among both manufacturers and service providers hit a 10-month low.

Nonetheless, companies continued to hire more people. This was exclusively a reflection of services jobs as factory workforce continued to decrease.

On the price front, the survey showed a further uptick in cost pressures in September. Input price inflation increased to a four-month high. Firms increased their prices albeit to the smallest extent since February 2021.

Among big-four economies, Spain's private sector returned to growth and the downturn in Germany and Italy softened, while France moved deeper into the contraction zone.

Germany posted a softer private sector contraction in September with the composite index rising to 46.4 from August's 39-month low of 44.6 and also remained above the flash 46.2. The slowdown owed exclusively to the improvement in services output as manufacturing production downturn worsened.

Services activity climbed back into growth territory. The final services PMI registered 50.3 in September, up from 47.3 in August and the flash reading of 49.8.

By contrast, France posted the biggest contraction since November 2020 with accelerated declines in both manufacturing and services sectors. The composite output index registered 44.1 in September, down from 46.0 in August but well above the flash 43.5.

The services PMI declined to 44.4 from 46.0 in August, signaling the sharpest reduction in output in almost three years. The initial score was 43.9.

Italy's private sector registered another moderate contraction in September with a sustained fall in manufacturing output. The composite output index came in at 49.2, up from 48.2 in August.

The services PMI remained fractionally below the 50.0 no-change mark in September at 49.9. This was down from 49.8 in August. The reading was seen at neutral 50.0 mark.

Spain's composite output index returned above the 50.0 no-change threshold, underpinned by services activity. The composite index climbed to 50.1 from 48.6 in the previous month.

The services PMI registered 50.5, up from 49.3 in August and economists' forecast of 49.8.

Official data showed on Wednesday that Eurozone retail sales declined more than expected in August as subdued consumer confidence and weak wage growth damped consumption.

The retail sales volume slid 1.2 percent on a monthly basis, slower than the 0.1 percent fall in July. This was the second consecutive drop and also worse than economists' forecast of 0.3 percent decrease.

On a yearly basis, the decline in retail sales deepened to 2.1 percent in August from 1.0 percent in July. Sales were expected to decline 1.2 percent.

"With eurozone data continuing to surprise to the downside, a downturn in economic activity remains a real risk for the short-term," ING economist Bert Colijn said.