Europe’s Business Activity Unexpectedly Contracts



Europe’s business activity unexpectedly contracted in September as the continent’s services industry stagnated and manufacturing continued to decline.

The European Purchasing Managers’ Index (PMI) decreased to 48.9, down from August’s reading of 51.

Any reading below 50 indicates a contraction, while a reading above 50 shows growth.

September marked the first contraction in Europe’s business activity since February of this year. Economist polled by the Reuters news agency had expected a September reading of 50.5.

Germany, Europe’s biggest economy, saw its business contraction deepen while France’s economy fell into contraction for the first time this year.

Germany’s economy contracted 0.1% in this year’s second quarter and the latest PMI survey suggests it has extended its downturn into the current third quarter.

A recession is typically defined as two consecutive quarters of economic contraction.

The September contraction in business activity has led economists to raise their bets that the European Central Bank will further reduce interest rates this year in a bid to revive the economy.

On Sept. 12, the European Central Bank cut interest rates and signalled a “declining path” for borrowing costs in the months ahead as inflation slows and economic growth weakens.



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