Euro zone business growth slows in September as prices keep sliding: PMI

Tue Sep 23, 2014 5:51am EDT
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By Jonathan Cable

LONDON (Reuters) - Euro zone business activity has expanded at a slightly weaker pace than expected in September as firms cut prices for the 30th month in a row, a survey showed on Tuesday.

The data will dishearten the European Central Bank, which is struggling to spur growth and revive inflation rooted way below its target.

Markit's Composite Flash Purchasing Managers' Index, based on surveys of thousands of companies across the region and seen as a good indicator of growth, dipped to a nine-month low of 52.3, shy of expectations in a Reuters poll for no change from August's 52.5.

The index has been above the 50 mark that separates growth from contraction since July 2013 although Markit said the latest survey pointed to third-quarter economic growth of just 0.3 percent.

"The ECB will be disappointed. It's got a big uphill battle on its hands and perhaps what the survey is saying is what they have done to date is not going to be enough," said Chris Williamson, chief economist at Markit.

"Although they will want to wait and see what the ABS purchases do in terms of stimulating the economy, the danger is the longer you wait, the more entrenched the downturn becomes."

The ECB surprised markets earlier this month by cutting benchmark lending and deposit rates further and said it would buy asset-backed securities and covered bonds.

Growth ground to a halt in the bloc last quarter as Germany's economy shrank and France's stagnated, adding to the pressure on the ECB, although no change to policy is expected when the Governing Council meets next week.   Continued...

A huge euro logo is pictured next to the headquarters of the European Central Bank (ECB) before the bank's monthly news conference in Frankfurt August 7, 2014.  REUTERS/Ralph Orlowski