A survey showed that manufacturing activity across the euro zone declined further last month as a deepening cost-of-living crisis kept consumers wary while rising energy bills curbed production.
The final reading of the S&P Global Manufacturing Purchasing Managers’ Index fell to a 27-month low of 48.4 in September from 49.6 in August, just below the initial reading of 48.5 and below the 50 mark that separates growth from contraction.
An index measuring production, which feeds into the composite PMI due on Wednesday and seen as good evidence of economic resilience, fell to 46.3 from 46.5, marking its fourth month of readings below 50.
S&P Global’s opinion
“The ugly combination of sluggish manufacturing and rising inflationary pressures will heighten concerns about the outlook for the eurozone economy,” said Chris Williamson, chief business economist at S&P Global.
“Except for the initial shutdowns caused by the pandemic, eurozone manufacturers have not seen a collapse in demand and production on this scale since the height of the global financial crisis in early 2009.”
A Archyde.com poll last month found there was a 60% chance of a recession in the bloc within a year.
Demand fell at the fastest rate since the time the Corona virus swept the world, and backlogs of orders decreased while stocks of unsold finished products increased as factories raised prices to meet rising costs.
What does this retreat mean?
This means optimism is waning, and the future production index, which assesses the expectations of purchasing managers for the next year, fell rapidly, as the index fell to 45.3 from 52.7, the lowest reading since May 2020.