The recovery of the euro zone's dominant service sector sagged in September as declines in Spain and Ireland offset resilient performances in Germany and France, a business survey showed today.
The Markit Eurozone Services Purchasing Managers' Index (PMI), which monitors the performance of thousands of companies ranging from banks to hotels, fell in September to a six-month low of 54.1 from 55.9 in August.
While that was revised up from a flash estimate of 53.6, and was still firmly above the 50 mark that divides growth from contraction, the survey showed a four-month acceleration in employment growth had come to an end.
Survey compiler Markit said the survey data indicated a still-healthy rate of quarterly economic growth of around 0.6 to 0.7 per cent for the third quarter, but down from the second quarter's four-year high of 1.0 per cent.
"However, with Ireland and Spain now both reporting falling activity levels, and growth all but stalled in Italy, the recovery is looking increasingly lop-sided and all-too dependent on France and Germany," said Markit's Chris Williamson.
The PMI surveys from individual euro zone members showed Ireland's services sector falling back into decline after a five-month upturn, while the contraction seen in Spain deepened in September.
Italy's stuttering recovery showed no signs of gaining any momentum in September, with the services index there barely changing at 51.3 from August's 51.4.
The German services PMI also fell last month, although it showed businesses hiring staff at the fastest rate in four months. In France, despite the main index dipping to a six-month low, business expectations bounced to a level not seen since January 2004.
Euro zone service sector employers hired staff at a slower rate in September, with the index falling to 51.3 from 52.0 in August, although unrevised from the flash estimate.
"Although business confidence picked up to a five-month high, this was not accompanied by an increase in job creation, which remains particularly disappointing," said Markit's Williamson.
He noted that job losses in Italy, Spain and Ireland again weighed against improvements in the German and French labour markets.
The euro zone jobless rate has been fixed at around the 10 percent mark for the last five months.
The euro zone composite PMI, a broader measure of private sector activity that combines both the services and the manufacturing PMI which fell on Friday, fell to a seven-month low in September, to 54.1 from 56.2 in August.
The new business index of the composite PMI fell to 53.1 from 55.0, while the employment index has stayed roughly steady for the last three months, above the 50 mark since May.
"The final PMI data round off a solid performance for the euro zone economy in the third quarter," said Markit's Williamson.
"However, the PMI for September is consistent with the rate of expansion slowing to just 0.3 per cent, highlighting the risk that growth could drop well below its long-term trend in the final quarter of the year."
Reuters