““The recovery has finished, we are now contracting. The forward looking indicators suggest that things will deteriorate further in the coming months,” – Chris Williamson, chief economist at PMI compiler Markit.
Thursday’s PMI surveys make very worrying reading. Not a single economist out of the 37 polled by Reuters predicted the euro zone services number would fall below the 50 level that divides growth from contraction. In the event, it fell from 51.5 last month to 49.1 in September – its lowest reading since July 2009.
Economists like the PMI surveys because they have a very good track record of predicting moves in the economy. Before the Great Recession hit in 2008, they were among the first indicators that hinted at a downturn to come.
The monthly Reuters economy poll of last week put only a roughly one-in-three chance of a recession happening in the euro zone over the next 12 months. Expect that to rise in the next survey.