You probably didn’t need further evidence to support the contention that Europe is headed for a recession, but just in case, the final read on IHS Markit’s Composite PMI for September slipped to 50.1 from the flash print of 50.4.
It’s the lowest reading since June of 2013 and effectively means the bloc’s economy has stagnated.
New orders fell to 48.7, down sharply from 50.5 in August. That’s the worst read in more than six years.
This is yet another case where the accompanying color sounds like it walked out of a blog post extolling the virtues of owning physical gold.
“The eurozone economy ground to a halt in September [with] the PMI surveys painting the darkest picture since the current period of expansion began in mid-2013”, Chris Williamson, Chief Business Economist at IHS Markit said.
Separately, data showed the UK services sector unexpectedly contracted in September, the latest example of Brexit woes starting to bite.
Markit went on to warn that “GDP looks set to rise by 0.1% at best in the third quarter, with signs of further momentum being lost as we head into the fourth quarter, meaning the risk of recession is now very real”.
As a reminder, momentum was already being “lost”. The major economies decelerated markedly in Q2 from Q1’s fleeting bounce. Germany almost surely fell into a recession in Q3 and it now appears as though activity across the bloc likely flatlined during the period.
This comes amid worsening trade tensions with the US. The Trump administration on Wednesday got the green light from the WTO to impose retaliatory tariffs on $7.5 billion in EU goods annually, in connection with the long-running dispute over civilian aircraft subsidies.
The USTR wasted no time in announcing new 25% levies on whiskies, cheese, wine, olives, yogurt and a long list of other goods. Civilian aircraft will be hit with 10% duties, a move which some say will have a deleterious effect on the US economy. Brussels will likely retaliate early next year once a parallel claim against Boeing is adjudicated.
Getting back to the September PMIs, IHS Markit’s Williamson notes that “the growing risk of recession, coupled with a further moderation of inflationary pressures, will add to expectations that the ECB will need to do more to stimulate the economy in coming months”.
Because it’s worked so well thus far…