Eurozone business activity slows further in September: PMI survey

(BRUSSELS) - Business activity in the 18-nation eurozone slowed further in September, a key survey showed Tuesday, adding to concerns that a timid economic recovery could be close to stalling.

Markit Economics said its Composite Purchasing Managers Output Index (PMI) fell for a second consecutive month, hitting a nine-month low of 52.3 points in September from 52.5 points in August.

The figures paint "a picture of ongoing malaise in the eurozone economy," said Chris Williamson of Markit Economics.

"With growth of output and demand slowing, employment once again failed to show any meaningful increase," Williamson said.

Weak demand can only put further pressure on prices, he said, and so add to the danger of deflation.

Deflation is an outright fall in prices and can lead consumers to put off purchases in the belief they can be made more cheaply if they wait.

That in turn sets off a vicious circle as companies cut investment as demand weakens, hitting jobs and salaries, and putting further pressure on prices.

Markit said its separate Eurozone Services Sector PMI Activity Index fell to 52.8 points in September from 53.1 in August, with the Manufacturing PMI Output Index at 51, unchanged.

The figures spooked the financial markets as they confirm other recent weaker data, with London and Frankfurt down about 1.0 percent while Paris shed 1.35 percent.

Analysts said the report was far from encouraging.

The figures "point to the eurozone economy still really struggling to get going as heightened geopolitical tensions weigh down on confidence and compound an already challenging environment," said Howard Archer of IHS Global Insight, citing the impact of the Ukraine crisis.

The reports "hardly make for enjoyable reading for the European Central Bank but (it) is clearly now going to sit tight for an extended period," Archer added.

The ECB has progressively cut interest rates to record lows and made huge amounts of cheap funds available to the banks in the hope they will lend to business and get the economy moving.

So far it does not seem to be working, with the eurozone economy slowing in recent months to show no overall growth at all in the second quarter of this year.

Williamson said the report suggested the economy could grow 0.3 percent at best in the third quarter but there "are also worrying signs that growth could slow further in the fourth."

"Concerns about the Ukraine crisis, related Russian sanctions and worries about the single currency area's general economic plight appear to be having an increased impact on the eurozone economy," he said.

The danger "is that the ECB's efforts to stimulate the economy will prove ineffective in the face of such headwinds, which are exacerbating already-weak demand," he added.