Euro-Area Growth Slows to Weakest in 19 Months Ahead of ECB

Updated on
  • PMI survey shows weaker German expansion dragging on region
  • ECB’s Governing Council meets on Sept. 7-8 in Frankfurt

European Central Bank headquarters in Frankfurt.

Photographer: Martin Leissl/Bloomberg

The euro-area economy lost momentum in August, with a gauge of private-sector growth falling to the lowest level since early 2015.

A Purchasing Managers Index for manufacturing and services slid to 52.9 from 53.2 in July, below an earlier estimate of 53.3, IHS Markit said on Monday. The drop was largely due to a weaker rate of expansion in Germany, the region’s largest economy, the London-based company said in a statement.

The report comes just days before the European Central Bank holds its first policy meeting after the summer break. Economists surveyed by Bloomberg predict officials will eventually be forced to add stimulus to sustain the recovery and raise inflation, even though they’re divided over when more measures will be announced.

“The survey data will fuel expectations that the ECB would prefer not to wait before injecting more stimulus into the economy,” said Chris Williamson, chief business economist at IHS Markit. Policy makers will be under pressure “to act later this week to help shore up confidence in both the outlook for the economy and the bank’s commitment to its inflation target.”

New-order growth slowed to the weakest since January last year, with signs emerging that job creation is cooling.

The slowdown in Germany is “perhaps the biggest source of concern,” Williamson said. With output growth at the weakest in 15 months, the economy still outperformed France, where the expansion accelerated to a 10-month high, according to the report.

An index gauging the region’s services sector fell to 52.8 from 52.9 in July, IHS Markit said.