According to the preliminary report from S&P Global, business activity in the private sector declined again in September, recording the third monthly drop in a row and the sharpest rate of reduction since May 2013 (excluding the pandemic period).
The Eurozone PMI Composite Output Index fell to 48.2 points in September from 48.9 points in August. An index value below 50 points indicates a reduction in activity in the private sector. The manufacturing PMI fell to 48.5 points from 49.6 points in August, reaching its lowest level since May 2020, and the services PMI fell to 48.9 points (the lowest value since February 2021) from 49.8 points. Economists had expected the indices to decline to 48.7 points and 49.0 points, respectively.
The data also showed that output fell for the first time since February 2021, as the third consecutive monthly drop in manufacturing output was accompanied by the first drop in activity in the services sector since January. Meanwhile, new orders for goods and services recorded the sharpest drop since April 2013, excluding periods of pandemic restrictions. Production orders fell particularly strongly, but the influx of new orders in the service sector also declined at a faster pace. The backlog of incomplete orders decreased at an increasingly rapid pace, and recorded the third monthly drop in a row. While employment growth was unchanged during the month, growth in August was the weakest in 17 months. The recent cooling in the labor market reflects increased caution about hiring amid rising costs and increasing economic uncertainty. While the easing of restrictions on the supply of raw materials helped to reduce some inflationary pressure, the rise in energy prices was the reason for the renewed acceleration of inflation in raw material costs in both industry and services. Overall spending growth was the sharpest since June. Higher price pressures meant that after four months of cooling, the pace of price growth for goods and services also accelerated to the highest values since June, as firms sought to protect margins. Looking ahead, business expectations for the coming year have plummeted, dropping to the lowest level since May 2020 and, excluding the pandemic, the lowest level since November 2012.