Business activity in the eurozone contracted for the first time in seven months in September, as France lost momentum after the end of the Paris Olympic Games, a key survey showed on Monday.
The preliminary composite eurozone Purchasing Managers’ Index, compiled by S&P Global, plunged to 48.9 from 51.0 in August. The activity measure fell below the 50 level that separates growth from contraction for the first time since February of this year. Economists had predicted a less severe drop to 50.5.
The services sector resumed its downward trend after rising during the Olympic Games. The services PMI plummeted to 50.5 in September from 52.9 the prior month, indicating broad stagnation in activity. Manufacturing output also fell, from 45.8 to 44.5. Meanwhile, the mood among German entrepreneurs continued to darken in September, according to a report by the Institute for Economic Research published on Tuesday.
The headline German Ifo Business Climate Index fell to 85.4 in September from 86.6 the prior month, missing economists’ forecasts of 86.0. Meanwhile, the Current Economic Assessment Index fell to 84.4 from 86.4 and below the 86.1 forecast by economists. The Ifo Expectations Index, which monitors firms’ expectations for the next six months, dropped to 86.3 in September from 86.8 in August. In particular, the business outlook for trade was marked by increased scepticism. Traders assessed their current situation to be slightly poorer. In contrast, business confidence in construction improved.
Finally, the Organisation for Economic Cooperation and Development said on Wednesday that the global economic growth remained resilient and inflation is declining, albeit significant risks remain, as it raised its global growth forecast for this year.
Global gross domestic product growth is forecast to stabilise at 3.2 per cent in both 2024 and 2025, while inflation should continue to subside, the OECD said in its latest economic outlook. GDP growth in the US is projected to slow down to 2.6 per cent in 2024 and further down to 1.6 per cent in 2025.
For the eurozone, the OECD projects growth to come in at 0.7 per cent in 2024 and notch up to 1.3 per cent in 2025, supported by a recovery in real incomes and an improvement in credit availability. The report advises governments to be wary of potential pitfalls and to continue implementing reforms that support economic growth.
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