The European Flash Purchasing Manager’s Index fell from 51.9 in August to 50.4 in September, just barely above the 50 mark, which separates growth from contraction. The biggest problem in the economic bloc to day is easy to spot, Germany, but it wasn’t alone.
Jack Allen-Reynolds at Capital Economics said:
“With the euro zone’s manufacturing sector in the doldrums and services activity starting to lose pace, there is little reason to think that GDP growth will pick up as the ECB and the consensus forecasts assume.”
Earlier figures from Germany, Europe’s largest economy, showed private sector activity shrank for the first time in 6-1/2 years as a manufacturing recession deepened unexpectedly and growth in the service sector lost momentum.
In France, the bloc’s second-biggest economy and the only other member for which flash numbers are published, growth slowed unexpectedly.
The weakness couldn’t come at a worse time, as Britain makes plans to leave the EU. If Britain leaves by the current deadline of October 31, it could cause widespread disruptions that put more weight on the euro zone economy.