Euro zone business growth stalls as German manufacturing shrinks

IHS Markit’s Euro Zone Composite Flash Purchasing Managers’ Index , seen as a good guide to economic health, suggested support for stuttering activity is needed.It sank to 50.4 in September from 51.9 in August and was below all forecasts in a Reuters poll that had predicted a reading of 51.9. That was just above the 50 mark separating growth from contraction and was its lowest since mid-2013.

“With the euro zone’s manufacturing sector in the doldrums and services activity starting to lose pace, there is little reason to think that GDP growth will pick up as the ECB and the consensus forecasts assume,” said Jack Allen-Reynolds at Capital Economics. While there are no signs of a turnaround yet, the German Economy Ministry said earlier this month that the country was not facing a bigger downturn or a pronounced recession after contracting slightly in the second quarter.But several institutes have said the economy would slide into recession this quarter.

“Worryingly, there were also signs that the weakness in manufacturing is spilling over into services,” Allen-Reynolds said.

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