Business activity in the eurozone slowed to its lowest point this year, keeping the focus on the European Central Bank as it struggles to overcome economic stagnation in the seventeen nation monetary union.
Data firm Markit Economics' monthly composite purchasing managers’ index, a gauge of activity and sentiment in the manufacturing and service sectors, dropped to 52.3 in September from 52.5 in August. The April score of 54.0 is the highest for this private data series in its publically released record of 31 months. Readings above 50 indicate expansion and below contraction.
The survey of 5,000 purchasing managers about current business, prospects and expectations indicated little near-term improvement is likely as new orders fell for the third month in a row and employment was static.
Eurozone unemployment was 11.5 percent in July, slightly better than the year's high in January of 11.8 percent and the 12.0 percent record in half of last year. There is little anticipation of job creation as the EMU economic growth flat lined in the second quarter after expanding a marginal 0.2 percent in the first.
Manufacturing PMI in the EMU slipped to 50.5 in September from 50.7 and is now at its low for the year. The high score was 54.0 in January. Services also registered its yearly low at 52.3 down 0.2 percent from August's 53.5 and 1.7 percent from the top of 54.0 in April.
The performance of the EMU's two largest economies continued to diverge. German surveys pointed to a slight acceleration of activity in September, with the composite PMI moving up to 54.0 from 53.7 in August. French surveys pointed to a deepening decline, the composite index dropped to 49.1 in September from 49.5. French managers are of the opinion that a recovery is unlikely soon, with new orders and employment decreasing for the 11th straight month.
Markit said that excluding Germany and France, growth in business activity was at its slowest in half a year.
The ECB has struggled to find the right mix of policies to spur economic growth and head off deflation. This month the bank cut three interest rates and began two asset purchase programs in an effort to spur bank lending to the private sector.
However the first installment of the so-called targeted long-term refinancing operation (TLTRO) saw only €82.6 billion in loans secured by 255 banks at the very low rate of 0.15 percent. Analysts had forecast a take-up amount of between €100 and €300 billion of the €400 billion made available by the central bank.
ECB President Mario Draghi said on Monday at the European Parliament in Brussels that the bank is ready to ease monetary policy yet again if necessary to assist the recovery and to prevent a prolonged bout of low inflation.
Monthly inflation was 0.1 percent in August with the years prices just 0.4 percent higher, the later the lowest annual CPI in four years, and except for the financial crash and its immediate aftermath, the lowest EMU inflation on record.
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