EcoFlash

Eurozone: Slightly deterioration of confidence in September

Thu, Sep 20 2012, 09:45 GMT
by Clemente De Lucia | BNP Paribas

Confidence in the eurozone slightly deteriorated in September, according to PMI figures released this morning. The composite PMI for activity was 45.9 in September, from 46.3 in August. The survey showed that GDP might contract once more in Q3 after falling by 0.2% in Q2. Hopefully, the recently adopted ECB measures could restore confidence going forwards.

Confidence in the eurozone slightly deteriorated in September, according to PMI figures released this morning. The composite PMI for activity, a good leading indicator of GDP growth, was 45.9 in September, down from 46.3 in August. Survey details showed that activity in both manufacturing and services sectors was still falling in September. However, while the pace of contraction deepened in the services, it eased somewhat in the manufacturing sector.

As the downturn continues and economic prospects remain subdued, businesses kept adjusting their workforce. In September, the composite PMI index for employment fell to its lowest level since January 2010. An increase in unemployment is likely to depress further domestic demand. It seems that firms are offering significant discounts to stimulate demand. Despite the increase in input prices (reflecting mainly the rise in oil prices), firms were still cutting output prices, according to the survey.

As regards country details, the survey showed some divergence. Confidence plunged significantly in France, with the Composite PMI losing almost 4 points in one month. Panellists identified the high level of uncertainty surrounding the economic outlook and the government policy as the main factors darkening the French economic prospects. By contrast, conditions in Germany have improved significantly, thanks mainly to a rebound in the services sector. According to the survey, output was almost stable in September (the composite PMI was close to the 50-mark) after falling in the previous 4 months. At the stage of flash estimates, Markit economics does not provide figures for the other economies of the area. Nevertheless, it is likely that the economic downturn deepened in the rest of the eurozone in September.

All in all, today data showed that output was still contracting in September. On a quarterly basis the index was almost stable (46.4 in Q2 versus 46.2 in Q3) which signals that GDP might fall again in Q3. Hopefully, the recent ECB decisions (adopted on September the 6th, and therefore probably not yet embedded in today’s data) might boost confidence going forward, pushing the eurozone out of recession.

Published On Thu, Sep 20 2012, 10:03 GMT Previous entries

Clemente De Lucia

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Expert in Euro Zone, Italy and Euro Zone Labour Market.

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