Eurozone slumps as France offsets German

Eurozone private sector business activity remained firmly stuck in the doldrums in September, with the key services sector suffering a very sharp fall, a survey showed Wednesday. The closely-watched Composite Purchasing Managers Index (PMI), a survey of 5,000 eurozone businesses compiled by Markit research firm, came in at 46.1 for September, up from an initial reading of 45.9 but down from 46.3 in August. The survey put services alone at 46.1 in September, better than the preliminary estimate of 46 but well short of 47.2 in August, with the sector downturn accelerating to the fastest pace since July 2009, Markit said. Any reading below 50 indicates a contraction in activity, with the latest figures in negative territory for an eighth month. The average PMI reading for the third quarter was 46.3, down from 46.4 in the second and the worst outcome since the three months to June 2009, signalling that the 17-nation eurozone economy has likely contracted further. While Germany edged closer to stabilisation, "the real causes of concern were France and Spain, which saw accelerated downturns," Markit said, noting that the French month-on-month fall "was among the sharpest in its history." "The final Eurozone PMI came in slightly better than the flash estimate but still signalled one of the steepest monthly downturns seen over the past three years," Chris Williamson, Markit chief economist said in a statement. "It seems inevitable that the region will have fallen back into recession in the third quarter," Williamson said, with the contraction likely to be worse than the 0.2 percent shrinkage in the three months to June. He said that despite signs of improvement in Germany, any hopes "that the current downturn has bottomed out are tempered by news of steepening rates of contraction in France and Spain and an ongoing severe downturn in Italy." Bailed-out Ireland was alone in positive territory on the Composite PMI at 53, a 17-month high, with Germany on 49.2, its best performance for four months. Spain hit 41.2 in September, a four-month low, with France on 43.2, its worst for 42 months and Italy at 44.8, still a 6-month high. Howard Archer at IHS Global Insight said the fall in the services sector "is very disappointing and worrying," reinforcing the view that the eurozone economy contracted further in the third quarter. "The prospects for a return to growth in the fourth quarter currently look far from bright given still markedly contracting incoming new business," Archer said.