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Wed, 24 Sep, 2014 12:00:03 AM FTimes- Xinhua Report, Sept 24
Eurozone business activity in September dropped to its lowest since December, painting a picture of ongoing malaise in the eurozone economy, according to a survey released Monday.
Markit Economics said its Composite Purchasing Managers Index (PMI) fell for a second month running to 52.3, down from 52.5 in August.
A reading above 50 indicates expansion, while a reading below 50 represents contraction.
"With growth of output and demand slowing, employment once again failed to show any meaningful increase," said Chris Williamson, chief economist at Markit.
"Such torpor meant prices continued to fall as firms fought for customers, which will inevitably heighten concerns that the region is facing deflation," Williamson said.
The European Central Bank (ECB) will be disappointed by the ongoing weakness of the PMI, he said. Deflation may put off people's purchase for they believe the price may become cheaper if they wait.
The ECB on Sept. 4 decided to cut all the interest rates by 10 basis points to a record low and start buying non-financial private sector assets.
As demand weakens, it will then lead to companies cutting their investment, which will worsen employment situation and curtail people's demand again, and at last put pressure on prices.
"The danger is that ECB's efforts to stimulate the economy will prove ineffective in the face of such headwinds, which are exacerbating already weak demand," said Williamson.
According to a separate survey, the flash Eurozone services activity index fell to a three-month low to 52.8 in September from 53.1 in August, with the flash Eurozone manufacturing PMI a 14-month low at 50.5 from 50.7 in August.
Williamson said the survey data suggested the economy could grow 0.3 percent at best in the third quarter and the growth could slow further in the fourth quarter.
"Concerns about the Ukraine crisis, related Russian sanctions and worries about the single currency area's general economic plight appear to be having an increased impact on the eurozone economy," he said.
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