Markit reports German Composite PMI sinks to lowest since October 2012.

Key Findings

▪ Flash Germany PMI Composite Output Index at 49.1 an 83-month low.

▪ Flash Germany Services PMI Activity Index at 52.5 a 9-month low.

▪ Flash Germany Manufacturing PMI at 41.4 a 123-month low.

▪ Flash Germany Manufacturing Output Index at 42 an 86-month low.

Comments from Phil Smith, Markit Principal Economist

  • “The manufacturing numbers are simply awful. All the uncertainty around trade wars, the outlook for the car industry and Brexit are paralyzing order books, with September seeing the worst performance from the sector since the depths of the financial crisis in 2009.”
  • “With job creation across Germany stalling, the domestic-oriented service sector has lost one of its main pillars of growth. A first fall in services new business for over four-and-a-half years provides evidence that demand across Germany is already starting to deteriorate.”

Eurozone His Stall Point

Markit reports Eurozone Close to Stalling in September as Factory Downturn Deepens.

Key Findings

  • Flash Eurozone PMI Composite Output Index at 50.4 a 75-month low.
  • Flash Eurozone Services PMI Activity Index at 52.0 an 8-month low.
  • Flash Eurozone Manufacturing PMI Output Index at 46.0 an 81-month low.
  • Flash Eurozone Manufacturing PMI at 45.6 an 83-month low.

Comments from Chris Williamson, Markit Chief Business Economist

  • “The eurozone economy is close to stalling as a deepening manufacturing downturn shows further signs of spreading to the services sector.
  • “The survey data indicate that GDP looks set to rise by just 0.1% in the third quarter, with momentum weakening as the quarter closed.
  • “The goods-producing sector is going from bad to worse, suffering its steepest downturn since 2012, but a further worrying trend is the broadening-out of the malaise to the service sector, where the rate of growth has now slowed to one of the weakest since 2014.
  • “The details of the survey suggest the risks are tilted towards the economy contracting in coming months. Most vividly, new orders for goods and services are already falling at the fastest rate since mid-2013, suggesting firms will increasingly look to reduce output unless demand revives.
  • “Furthermore, hiring is being scaled back due to the order book slowdown, with jobs growth now down to the lowest since the start of 2015. A worsening labour market adds to the risk that households could trim their spending.
  • “The overall picture of an economy on the cusp of sliding into decline is underscored by a further deterioration in firms’ pricing power, with average prices charged for goods and services barely rising in September.
  • “With survey data like these, pressure will grow on the ECB to add to its recent stimulus package.”

Mish Comments


  1. This is not 2012 or 2104 where stepping on more QE would help.
  2. The US is not immune to a slowdown in Europe and China, just as China was not immune to a global slowdown in 3007.

Decoupling Theory

Some readers may recall that I correctly rebutted the widespread notion in 2007 that China would decouple from the global economy.

Other readers may note that I failed to recognize that QE in 2012-2014 would help.

They are both correct.

Mish Policy

I have a simple policy: Admit mistakes before someone forcibly admits them for you.

If you are looking for perfection, you won't find it here, or for that matter anywhere else.

Admissions aside, the notion that a third of the global economy will decouple from two thirds of it is silly.

The US is no more immune from a slowdown in China and the Eurozone today than China was immune from a slowdown in the US and the Eurozone in 2007.

US Will Not Decouple

Decoupling theory is silly. The US will not decouple.

Either the Eurozone and Chinese economies pick up, or the US slides with them.

Place your bets.

Mike "Mish" Shedlock

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