World Economy

France, Italy Weigh on Eurozone Economy

France, Italy Weigh on Eurozone Economy
France, Italy Weigh on Eurozone Economy

Growth in the eurozone slowed again in September as economic downturns in France and Italy took their toll, according to a closely watched economic indicator.

The Markit eurozone composite output index fell to a 10-month low of 52. Although the index was above 50 – the level that indicates an increase in activity – the slowing growth will cause a headache for policy makers, wrestling with a stagnant economy and stubbornly high unemployment, Financial Times online reported.

Last week, The European Central Bank unveiled measures – including purchasing private sector assets – aimed at jump-starting slowing growth across the eurozone.

France saw a decline of both manufacturing and services activity in September, which outweighed the stronger performance of smaller economies in Ireland and Spain. Italy, meanwhile, posted a sharp drop in its service sector alongside an increase in manufacturing activity.

Chris Williamson, chief economist at Markit, said, “The PMI suggests the eurozone economy remained stuck in a rut in the third quarter.”

Both output and services activity were lower than the previous month, according to Markit. New business activity in the services sector across the eurozone fell to a six-month low.

There was good news from Germany where job creation sped up compared with the previous month. But the rate of new jobs in both Ireland and Spain slowed.

“The overall picture is one of a euro area economy that is struggling against multiple headwinds,” said Williamson. “These include a lack of domestic demand in many countries, subdued bank lending, sanctions with Russia and a reluctance of companies to expand in the face of an uncertain economic outlook.”