Euro-Area Economy Loses Momentum as Uncertainty Saps Growth

  • Composite PMI falls to 52.6 in September from 52.9 in August
  • Businesses are cautious amid increased political uncertainty

Jeffrey: Euro was Doomed from Day One

The euro-area economy is losing steam as political uncertainty looms large over the 19-nation region.

A Purchasing Managers’ Index for the manufacturing and services sector slid to 52.6 in September from 52.9 in August, London-based IHS Markit said on Wednesday, confirming a Sept. 23 estimate. That’s the lowest level since January 2015. A reading above 50 signals expansion.

Policy makers are struggling to shore up growth and inflation in a region increasingly beset with populist political movements. Ahead of national votes in some of the bloc’s largest economies, challenges from how to deal with the U.K.’s decision to leave the European Union to integrating migrants into a workforce strapped by high unemployment need to be met.

“The slowing rate of growth across the region in part reflects growing caution among businesses,” said Chris Williamson, chief economist at IHS Markit. “We see this trend persisting into next year, as the impact of Brexit is exacerbated by uncertainty surrounding elections in France and Germany alongside ongoing political unrest in Italy and Spain.”

A PMI for services fell to 52.2 in September from 52.8, according to the report. A measure for manufacturing rose to 52.6 from 51.7, IHS Markit said Oct. 3.

Among the region’s four major economies, France was the only one registering a pick-up in momentum, with stronger growth in services more than making up for near-stagnant manufacturing. Activity slowed in Germany, Italy and Spain.

Williamson said PMI data suggest the euro-area economy expanded by 0.3 percent in the third quarter, the same rate recorded in the previous three months. But there are signs the recovery is slowing down.

“While we see the euro-zone economy expanding by 1.6 percent in 2016, even this modest growth is looking unattainable in 2017 given the heightened political uncertainty that lies ahead,” he said.

Before it's here, it's on the Bloomberg Terminal.