European businesses are terrified about the future -- and it is crushing the economy

European businesses are scared about uncertainty in the near future and are deferring spending as a consequence, slowing down the eurozone economy to a level not seen since 2014, according to the latest PMI data from IHS Markit released on Wednesday morning.

Markit’s final composite PMI figure for the eurozone — a measure of growth in the continent-wide economy — confirmed a reading of 52.6 in September. That was a fall from August’s 52.9 reading, and in line with the flash estimate released last week.

The purchasing managers index (PMI) figures from Markit are given as a number between 0 and 100. Anything above 50 signals growth, while anything below means a contraction in activity — so the higher the better.

So, while the eurozone is still growing, what is worrying are the comments of IHS Markit’s Senior Business Economist Chris Williamson in a release alongside the data.

Williamson argued that the political uncertainty in Europe right now, surrounding things like Brexit, and upcoming elections across the continent, means that businesses are investing, which in turn is crushing growth and is only going to get worse. Here’s what he had to say (emphasis ours):

“The slowing rate of growth across the region in part reflects growing caution among businesses in terms of their spending due to worries about the economic outlook, linked in many cases to political uncertainty. We see this trend persisting into next year, as the impact of Brexit is exacerbated by uncertainty surrounding elections in France and Germany alongside ongoing political unrest in Italy and Spain.”

“Of the four largest euro states, only France is showing signs of its upturn gaining momentum, with growth trending lower in Germany, Italy and Spain.”

Here’s the full scoreboard of PMIs:

  • Services PMI — 52.2 (Flash: 52.1, August Final: 52.8)
  • Composite PMI — 52.6 (Flash: 52.6, August Final: 52.9)

And here’s IHS Markit’s chart:

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