Germany may have fallen into recession in September, services PMIs show
Activity in the euro area's services sector cooled more quickly than expected last month, to its slowest pace year-to-date, amid weakening export trade and with companies running down their order backlogs, to the point that economic growth overall may have ground to a halt and with Germany entering a recession, the results of closely-followed surveys found.
IHS Markit's Eurozone service sector Purchasing Managers' Index declined from a reading of 53.5 for August to 51.6 in September (Preliminary: 52.0).
The weakness was greatest in Germany, with the country's services PMI falling from 54.8 to 51.4 (Preliminary: 52.5), while a separate services PMI for France slipped from 53.4 to 51.1 (Preliminary: 51.6).
Commenting on the German services data, IHS Markit principal economist Phil Smith said: "The slowdown in the service sector in September was even worse than first feared, with the final results showing the weakest business activity growth for three years. A technical recession now looks to be all but confirmed."
It was the first time that the German surveys (manufacturing and services combined) had signalled an economic contraction since April 2013.
Back at the euro area level, the flow of new orders registered its first drop since January. It was also the biggest decline since the middle of 2013, albeit only modest, the consultancy said.
The euro area's gross domestic product looked set to expand at a quarterly pace of just 0.1% over the three months to September, "with signs of further momentum being lost as we head into the fourth quarter, meaning the risk of recession is now very real," IHS Markit chief business economist, Chris Williamson, said.
"The downturn also shows further signs of spreading from manufacturing to services. [...] The deteriorating picture is being led by a downturn in Germany, but France and Italy are also close to stalling and Spain has seen growth slow to the joint-lowest in around six years."