The private activity in the eurozone as a whole registered a contraction in September, until falling to its worst level in the last 20 months, as reflected in the purchasing managers’ index (PMI, for its acronym in English) composite, compiled by S&P Global, and which has stood at 48.2 points, from 48.9 in August. The index produced by S&P Global It is done on the barrier of 50 points. If the index exceeds that figure, there is growth and expansion of activity, while if it is below, there is decrease and contraction.
“A recession is on the horizon for the euro zone, as companies point to worsening business conditions and rising price pressures, linked to skyrocketing energy prices,” said S&P Global Market chief economist. Intelligence, Chris Williamson, which estimates a contraction of 0.1% of GDP in the third quarter.
On its side, the advance indicator for September of the commercial activity of the services sector stood at 48.9 points, nine tenths less than in August. This represents the worst level recorded in the last 19 months. Likewise, the leading indicator of the activity of the manufacturing sector has fallen to its worst level for 27 months, standing at 48.5 points, from the 49.6 integers observed in August.
If the contraction observed during the confinement due to the pandemic is not taken into account, the decline in private activity in the eurozone in September is more intense since 2013, as explained by S&P Global. In addition, the report prepared by the firm leaves little room for optimism. The document indicates that both the index of new orders, as well as that of pending orders and that of future expectations “suggest that the decline will continue to gain momentum in the coming months.”
S&P has warned that “shooting energy prices” added to the “growing” cost burden of companies. In addition, in some cases they also limited production and business activity, driving prices to even higher levels. For the entity, this suggests a renewed acceleration of inflationary pressures.
“As demand is slumping and firms are becoming increasingly pessimistic about the outlook, the study’s forward-looking indicators suggest a growing economic decline for the euro zone in the fourth quarter, increasing the chances that the region will fall in recession,” Williamson added.