(RTTNews) - The euro area private sector activity posted a renewed contraction in September, signaling a further weakening of the economy, a survey compiled by S&P Global showed Monday.
The HCOB flash composite output index dropped to 48.9 in September from 51.0 in August. The reading was the lowest in eight months and remained below the forecast of 50.6.
The fall in overall business activity was driven by a deepening downturn in manufacturing activity, where production fell for the eighteenth month in a row.
Although services business activity continued to grow, the pace of growth was the weakest since February.
The manufacturing Purchasing Managers' Index slid to a nine-month low of 44.8 in September from 45.8 in the prior month. The score was expected to drop to 45.7.
The services PMI posted 50.5 in September, which was down from 52.9 in August and well below forecast of 52.3.
Overall output fell for the first time in seven months amid a sustained fall in new orders. New business decreased at the sharpest pace since January. With falling new orders, volumes of outstanding business decreasing at sharper rates and business confidence hitting at a ten-month low, companies scaled back their workforce numbers for the second straight month.
The weakness in demand helped to ease inflation of both input costs and output prices.
The French private sector returned to contraction after an Olympic-related boost to activity and joined Germany where the pace of fall was the most pronounced since February.
"With the ECB closely watching the persistently high inflation in services, the news that both input and output price inflation has slowed down is certainly welcome," Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said.
"Add to that the deepening recession in manufacturing and the near-stagnation of the services sector, and the possibility of another rate cut in October could very well be on the table, even though this is not the expectation of the market yet," de la Rubia added.
