The European economy is going backwards

The eurozone’s economy is still struggling to grow at any meaningful pace, and is “losing rather than gaining momentum,” according to the latest PMI data released by Markit on Monday morning.

Markit’s final composite PMI figure for the eurozone — a measure of growth in the continent-wide economy — confirmed a reading of 52.9.

That missed an earlier flash reading, released in late August, which showed a score of 53.3. As well as missing the flash estimate, it is marginally lower than July’s final 53.2 reading.

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.

Here’s the full scoreboard of PMIs:

  • Services PMI — 52.8 (Flash: 53.1, July Final: 52.9)
  • Manufacturing PMI — 51.7 (Flash: 51.8, July Final: 52.0)
  • Composite PMI — 52.9 (Flash: 53.3, July Final: 53.2)

Markit also provided breakout readings for the eurozone’s four largest economies, which showed better than expected results for all of Europe’s major economies, besides Germany, which missed to the downside of economist expectations. Take a look at the numbers provided by Markit:

  • Spain services — 56, expected 55.1
  • Italy services — 52.3, expected 51.9
  • France services — 52.3, expected 52
  • France composite — 51.9, expected 51.5
  • Germany services — 51.7, expected 53.3
  • Germany composite — 53.3, expected 54.4

Here’s the single currency area-wide chart:

Speaking about the results, IHS Markit’s chief business economist Chris Williamson said (emphasis ours):

“It’s clearly disappointing to see the final PMI has come in weaker than the initial flash estimate. While the overall picture is one of steady but sluggish 0.3% growth in the third quarter, the revised figures indicate that the economy is losing rather than gaining momentum.

“Inflationary pressures are also cooling amid intense competition, and hiring is on the wane as businesses grow more concerned about the outlook.

“The survey data will fuel expectations that the ECB would prefer not to wait before injecting more stimulus into the economy, adding pressure for policymakers to act later this week to help shore up confidence in both the outlook for the economy and the bank’s commitment to its inflation target, even if simply by extending its QE programme.”

The European Central Bank will hold its September meeting on Thursday, its first since July, when president Mario Draghi signalled further easing could be possible in the autumn. Given the sluggish growth of the single currency are, expectations of an extension of QE, or even a further rate cut, are likely to rise.

At 9:30 a.m. BST (4:30 a.m. ET) Markit will release the latest data from the UK’s dominant services sector — which accounts for more than 75% of GDP. Last week, British manufacturing bounced back strongly from an initial post-Brexit plunge, thanks in part to the weakening pound making exports cheaper.

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