Eurozone business activity contracts as manufacturing downturn continues

Business activity across the eurozone unexpectedly contracted this month, according to preliminary estimates released on Monday by S&P Global and Hamburg Commercial Bank, marking the first decline in seven months due to a sustained reduction in new orders.

The eurozone composite purchasing managers' index (PMI), which tracks both the manufacturing and services sectors, dropped to 48.9 in September, down from 51.0 in August and below the key 50-point level which separates contraction and expansion.

This was the lowest reading since January and well below the consensus estimate of 50.6.

The contraction was driven by yet another downturn across the region's manufacturing sector, which has now declined for 18 months in a row, with the manufacturing PMI dropping to 44.8 from 45.8 over the month.

In particular, the manufacturing sector of industrial powerhouse Germany continues to weaken, with the national manufacturing PMI (also out on Monday) sinking to a 12-month low of 40.3 from 42.4 the month before.

Meanwhile, the eurozone service sector, which has propped up overall growth over the past year, saw momentum ease slightly with the PMI falling to a seven-month low of 50.5 from 52.9 previously.

"With new orders and volumes of outstanding business falling at sharper rates and business confidence at a ten-month low, companies scaled back their workforce numbers for the second month running. Meanwhile, demand weakness resulted in slower inflation of both input costs and output prices," the survey said.