The eurozone’s economic recovery ground almost to a halt in September, as a renewed fall in service sector activity countered faster manufacturing growth.
The IHS Markit Composite PMI output index, a GDP-weighted average of the manufacturing and service sector survey gauges, fell from 51.9 in August to 50.4, signalling only a mild increase in business activity.
While the survey continues to indicate that the economy rebounded strongly over the third quarter as a whole, thanks to a strong surge at the start of the quarter (after business activity contracted sharply during the height of the Covid-19 pandemic in the second quarter), the rebound lost almost all of its momentum as the third quarter progressed. As such, the survey indicates an increased risk of the economy sliding back into contraction in the fourth quarter.
Spain suffers greatest hit, only Germany shows resilient recovery
A downturn in service sector activity during September was widely blamed on a second wave of virus infection rates in many countries, with social distancing restrictions curbing recreation, leisure, travel and tourism activities in particular.
Spain’s service sector was especially hard-hit. With the exception of the March-to-May period at the height of the first wave of infections, Spain’s service sector collapse in September was the largest recorded since November 2012.
However, renewed service sector downturns were also recorded in France, Italy and Ireland, while a near-stalling was recorded in Germany, underscoring the broad-based geographical spread of the worsening service sector picture.
Furthermore, due to the relatively large size of service sectors compared to manufacturing, the weakening of the former exerted a marked toll on overall business activity. Output in France, Spain and Ireland consequently contracted in September, and remained broadly stagnant in Italy. Of the four largest eurozone member states, only Germany saw a robust overall expansion of