Europe’s Economy Sees No Traction as Germany Loses Momentum

  • Index of economic activity in Germany falls to a 16-month low
  • France outperforms peers with strongest growth in 15 months

The euro-area economy saw its pace of growth dip to a 20-month low at the end of the third quarter, highlighting the challenge facing policy makers to build momentum.

IHS Markit said its monthly composite Purchasing Managers Index declined to 52.6 in September from 52.9 in August. Services weakened and manufacturing improved, with all three measures staying above the 50 mark that divides expansion from contraction.

The slowdown was largely due to Germany, where the services sector barely eked out any growth. Markit said the euro-zone PMI indicates growth of “close to” 0.3 percent in the third quarter, little changed from the pace recorded in the three months through June.

It’s “clear that the economic upturn is still fragile and failing to achieve any real traction,” said Rob Dobson, a senior economist at Markit in London. “The door remains open for policy makers to provide further policy support later in the year if they see economic conditions moderate further.”

In Germany, Europe’s largest economy, the PMI showed a loss of momentum. The composite gauge dropped to 52.7, a 16-month low, from 53.3 in August. France, meanwhile, posted its strongest expansion in 15 months with the measures for both manufacturing and services improving.

The report also showed that average selling prices rose for the first time in more than a year, but only barely, and inflationary pressures are still “muted.” The increase will nonetheless be welcome at the European Central Bank, which is working to lift inflation toward its target of just below 2 percent.

“The bright spot for the ECB is that almost everywhere you look, price pressures are increasing,” said Frederik Ducrozet, an economist at Pictet & Cie in Geneva. “It’s coming from a very low base but they will see it as good news.”

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