The prospect of a collapse in the eurozone economy is looming more significant, with a continuous decline in output for four consecutive months. S&P Global, as reported by Reuters, revealed that the Eurozone’s economy contracted in the third quarter, marked by the steepest decline in demand witnessed in almost three years last month.
The final Composite Purchasing Managers’ Index (PMI) for the region, indicating the overall economic health, saw a marginal increase from 46.7 in August to 47.2 in September, though still below the critical threshold of 50, signifying economic contraction.
This downturn was particularly severe in the industrial sector, exacerbating the ongoing decline in overall output. The services sector also experienced a reduction in output, as revealed by the S&P study.
Official figures released on Wednesday underscored the concerning trend, showing a greater-than-anticipated fall in retail sales in the euro area for August. This decline is indicative of reduced consumer spending attributed to soaring prices. The composite new business index, reflecting general demand, plummeted to its lowest level since November 2020 in September.
Franziska Palmas of Capital Economics, cited by Reuters, expressed concern, stating, “The drop in retail sales in August and the weakness in the final PMIs for September are consistent with our view that the Eurozone economy will fall into recession in the second half of 2023.”
A separate poll indicated that manufacturing activity across the 20-country euro area sustained a persistent decline last month, mirroring the continued drop in demand.
On a relatively positive note, S&P data highlighted an improvement in the employment measure for service firms, rising from 50.4 to 51.5; this suggests that, despite the economic challenges, there is still a notable increase in hiring within the service sector. Cyrus de la Rubia from Hamburg Commercial Bank emphasized the significance of this, noting, “There is still a rush for people to work in the service sector,” adding that Eurozone companies hired more people at an accelerated pace compared to August, a noteworthy development amid sluggish new business growth.