FRANKFURT- Investor morale in the euro zone fell more than expected at the start of September as Germany’s economic weakness remained a major drag on the region, a survey showed on Monday.
Sentix’s index for the euro zone declined to -21.5 points in September from -18.9 in August, weaker than the -20.0 estimate in a Reuters poll of analysts.
“The situation in Germany remains particularly precarious. Here we are measuring the weakest situation … since July 2020, when the economy was slowed by the first coronavirus lockdown,” Sentix Managing Director Manfred Huebner said.
“Germany is also weighing heavily on the economy in the euro zone as a whole … The tipping point of a global recession is less distant than one might think.”
The sub-index for future expectations in the euro zone also fell to -21.0 points, from -17.3 in the previous month. The current situation index declined to -22.0 points, its lowest level since November 2022.
Singling out Germany, Huebner said the “complete lack of economic competence in the political leadership and the enormous uncertainties for the economy caused by the energy and electricity crisis are dragging the German economy deeper and deeper into recession”.
He said that the current situation sub-index for Germany was at the lowest level since the coronavirus crisis in July 2020, adding the only time it had been lower was during the 2008/2009 financial crisis.
Euro zone business activity shrank much more than expected in July as demand in the bloc’s dominant services industry declined while factory output fell at the fastest pace since COVID-19 first took hold, a survey showed.
The decline was broad-based with the euro zone’s two biggest economies – Germany and France – both in contractionary territory and will likely add to fears the bloc will slip back into recession.
The survey also indicated the European Central Bank’s sustained campaign of interest rate rises is starting to take its toll on consumers and denting the services sector.
HCOB’s flash Composite Purchasing Managers’ Index (PMI) for the euro area, compiled by S&P Global and seen as a good gauge of overall economic health, dropped to an eight-month low of 48.9 in July from June’s 49.9.
That was below the 50 mark separating growth from contraction and lower than all expectations in a Reuters poll which had predicted a modest dip to 49.7.
“The weakness was widespread across all sectors, but it was the manufacturing sector that posted another bad reading,” said Paolo Grignani at Oxford Economics. – Reuters
