Euro-Area Economy Comes Close to Stalling as Factories Suffer

(Bloomberg) --

Growth in the euro-area economy almost ground to a halt at the end of the third quarter amid evidence that the manufacturing slump is starting to spread into the services sector.

A Purchasing Managers’ Index for the 19-nation region fell to 50.4 in September, missing estimates, down from 51.9 a month earlier and the weakest in more than six years, a report by IHS Markit showed. That suggests growth of just 0.1% in the third quarter and further deterioration in the coming months, it said.

The private sector in Germany, the region’s largest economy, slid into a broad contraction for the first time since April 2013.

The signs of deepening malaise come less than two weeks after the European Central Bank decided in a contentious meeting to roll out new monetary stimulus measures including a rate cut and a restart of its bond-buying program. The package could yet turn out to be insufficient, according to Markit.

“The details of the survey suggest the risks are tilted towards the economy contracting in coming months,” Chris Williamson, an economist at Markit said. “With survey data like these, pressure will grow on the ECB to add to its recent stimulus package.”

Trade tensions and the prospect of Britain’s departure from the European Union without a divorce deal continued to weigh on manufacturing. Euro-area factories are suffering their sharpest decline in output since 2012, and orders are falling.

With weakness affecting services -- where growth reached its weakest pace in eight months -- companies are becoming reluctant to hire. Growth in employment was the weakest since January 2015 this month.

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