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Private sector economic activity in the Eurozone rose for the second month in September, suggesting that the economic recovery is gaining momentum.
A composite indicator for both manufacturing and services activities rose to a 16-month high of 50.8 in September from 50.4 in August, a survey conducted by Markit Economics showed Wednesday. Economists had forecast a reading of 51.3. It follows declines in past fourteen months, with the rate of deterioration hitting a peak in February.
Among the sub indicators, manufacturing purchasing managers' index or PMI rose to 49 from 48.2 in August. Thus, it reached a 15-month high. But, it came in lower than the expected reading of 49.7. "The data confirm our forecast that the Eurozone economy will continue to grow in the second half of the year," Commerzbank analyst Christoph Weil said.
A second consecutive monthly rise in manufacturing output was accompanied by the first improvement in service sector business activity in 16 months. However, rates of increase were only modest in both sectors and even slowed slightly in manufacturing. The flash Eurozone services PMI stood at 50.6 in September, up from 49.9 in August.
"The flash PMIs for September round off the strongest quarter since Q2 of last year, suggesting that the Eurozone economy stabilized in Q3. Robust manufacturing inventory ratios and service sector confidence suggest we could see an even better performance in Q4," said Chris Williamson, Chief Economist at Markit. He noted that the momentum of the rebound is showing some signs of waning, with an increase in the rate of job losses in September particularly disappointing, and suggesting only modest growth lies ahead.
New orders rose for the first time in seventeen months, with orders recovering in the services sector and manufacturing sector with a second successive increase. Backlogs of work fell for an 18th successive month, with the pace of decline unchanged from August. The pace of decline moderated to the slowest in 16 months in the manufacturing sector, but slightly accelerated in the services sector.
The pace of decline in employment increased slightly in September from August's 10-month low. Slight fall was observed in the services sector, but the decline was sharp in manufacturing.
The composite indicator for input prices suggested that pace of deflation moderated further to the weakest level in 10 months. The gauge for output prices also indicated that deflation weakened again.
Markit Economics also released PMI data for Germany and France. The flash Germany composite output index stood at a two-month low of 52.2 in September, down from 54 in August. The manufacturing PMI rose to a 13-month high of 49.6 from 49.2 in August and the services PMI fell to 52.2 from 53.8.
The Markit/CDAF flash composite output index for France rose to 53.9 from 51.3 in August, an 18-month high. It was due to an increase in the manufacturing PMI to 52.5 from 50.8 and a rise in the services PMI to 52.2 from 49.3.
Elsewhere, data released by the Eurostat showed that new orders to Eurozone industries rose 2.6% month-on-month in July, slower than a revised 4% rise in the previous month. Economists expected a 2% growth. New orders rose mainly due to a 5.6% increase in orders for durable consumer goods.
On a yearly basis, new orders fell 24.3%, but slower than a revised 25.7% decline in the preceding month. Economists expected a 25.9% drop. All industrial groups showed a fall in orders, with orders for capital goods showing the maximum fall of 27.7%.
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