The eurozone economy lost steam towards the end of the third quarter, data out Friday suggested, as Germany contended with services sector weakness and a French manufacturing downturn continued.
Preliminary purchasing managers' indices for September from IHS Markit showed the eurozone composite purchasing managers' index fell more than expected to a 20-month low of 52.6 from 52.9, worse than the consensus 52.8 forecast. The services sector index unexpectedly slipped to a 21-month low. But the manufacturing PMI made a surprise jump to a three-month high of 52.6 from 51.7. It rose amid the steepest gain in new export orders in two and a half years, a development that will ease Brexit-related panic and which follows weak German trade figures for July.
The PMIs are closely watched worldwide because they track a range of "real economy" variables including sales, employment, inventories and prices. The three Friday eurozone indices came after news of unexpected declines in the German composite and services sector PMIs, which fell to 16-month and 39-month lows, respectively, while the German manufacturing index rose more than expected to a three-month high.
In France the index trio all rose more than expected, with the composite index, at 53.3 compared with 52.7 in Germany, topping its larger neighbor for the first time in four years. However, the French manufacturing PMI stayed within sub-50 contraction territory. In August the composite and the service PMIs for the eurozone had both fallen short of expectations.
"The eurozone economy ended the third quarter on a disappointing note," said IHS Markit senior economist Rob Dobson. "While the underlying picture remains one of sluggish growth of close to 0.3% over the quarter as a whole, it also remains clear that the economic upturn is still fragile and failing to achieve any real traction. Job creation is wavering as a result, with employment rising at the slowest pace since April.
"With inflationary pressures also still relatively benign and business confidence at service providers dipping to a 21-month low, the door remains open for policymakers to provide further policy support later in the year if they see economic conditions moderate further," he added.
The IHS Markit reports came after French statistics agency Insee unexpectedly revised down French second-quarter GDP growth to minus 0.1%. Its original estimate was for second-quarter economic stagnation, which had come as a shock after the economy expanded by 0.7% in the first quarter.
Capital Economics' European economist Stephen Brown said today's IHS Markit data increase the pressure on the European Central Bank to act and predicted it will extend its asset purchase program by December at the latest.
European stock benchmarks were down on Friday, with the Euro Stoxx 600 0.55% lower by late morning at 345.93.
The euro was up 0.06% against the dollar at $1.1215 and the yield on the German 10-year government bond was up 1 basis point at minus 0.09%.
The eurozone economy expanded by 0.3% in the second quarter after 0.5% growth in the first quarter.