Business activity in the euro zone slipped again in September, with growth in both the region’s manufacturing and services sectors slowing over the month.
This has fueled further concerns that consumer prices could start to fall and push the bloc into a period of deflation, despite the best efforts of the European Central Bank (ECB).
The flash composite Purchasing Managers’ Index (PMI) for the euro zone came in at 52.3 in September, according to data provider Markit, below Reuters forecasts of 53.5. It also marked a fall from August’s reading of 52.5 and hit a nine-month low.
A reading above 50 indicates expansion, however, and September’s reading marked the 15th consecutive month of growth.
Chris Williamson, the chief economist at Markit, told CNBC that the PMIs pointed to a further waning of euro zone growth in September. He said there were some quite negative signs of meager performance by Europe’s businesses and that the region is still “moving in the wrong direction.”
“With growth of output and demand slowing, employment once again failed to show any meaningful increase. Such torpor meant prices continued to fall as firms fought for customers, which will inevitably heighten concerns that the region is facing deflation,” Williamson said in the official release on Tuesday morning.
The manufacturing sector’s PMI fell to 50.5, its lowest since July 2013 and edging closer to contraction. Markit said that faster growth in Germany, especially in the services sector, had been offset by an ongoing downturn in France and slowing of growth elsewhere in the region.
“For a central bank hoping that the economic data flow will start to improve, the ECB will be disappointed by the ongoing weakness of the PMI,” Williamson added.
“The danger is that the ECB’s efforts to stimulate the economy will prove ineffective in the face of such headwinds.”
On Monday, the President of the ECB, Mario Draghi, stepped into the spotlight and defended the effectiveness of his stimulus policies. He also warned that the economic recovery in the euro area is losing momentum.
“The early information on economic conditions which we received over the summer has been somewhat weaker than expected,” Draghi told the EU’s Committee on Economic and Monetary Affairs. He defended the take-up of the ECB’s latest cheap loan program, dubbed TLTROs, saying that the take-up was with within the range that the bank had expected.