Business activity in the euro zone contracted in September for the first time in seven months, a major survey showed on Monday, as France lost momentum after the Paris Olympics ended.
The preliminary Eurozone Purchasing Managers' Economic Index compiled by S&P Global was 48.9, down from 51.0 in August. The activity index fell below the 50 level, the dividing line between growth and contraction, for the first time since February. Economists had expected a less severe drop to 50.5.
After rising during the Olympic period, the services sector returned to a downward trend. Services sector PMI fell sharply in September to 50.5 from 52.9 the previous month, indicating widespread stagnation in activity. Manufacturing production also fell from 45.8 to 44.5. Meanwhile, the mood among German entrepreneurs remained gloomy in September, according to a report released Tuesday by the Institute for Economic Research.
Germany's Ifo index of business conditions in September was 85.4, down from 86.6 the previous month and below economists' expectations of 86.0. Meanwhile, the current economic evaluation index fell from 86.4 to 84.4, lower than economists' expectations of 86.1. The IFO Expectations Index, which monitors business expectations for the next six months, fell to 86.3 in September from 86.8 in August. In particular, there was a noticeable increase in skepticism about the economic outlook in the trade sector. Traders assessed the current situation as slightly deteriorating. In contrast, business confidence in the construction industry improved.
Finally, the Organization for Economic Co-operation and Development on Wednesday raised its forecast for global economic growth this year, saying that although significant risks remain, global economic growth remains resilient and inflation is falling.
In its latest economic outlook, the OECD said global gross domestic product (GDP) growth is expected to stabilize at 3.2% in both 2024 and 2025, while inflation is expected to remain subdued. US GDP growth is expected to slow to 2.6% in 2024 and further slow to 1.6% in 2025.
For the euro area, the OECD forecasts growth of 0.7% in 2024, reaching 1.3% in 2025, supported by a recovery in real incomes and improved credit availability. The report recommends that governments be wary of potential pitfalls and continue to implement reforms that support economic growth.
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