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Purchasing Managers’ Index® MARKET SENSITIVE INFORMATION
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Markit Flash Eurozone PMI

®

Eurozone sees steepest contraction since June 2009 despite downturn easing in Germany
Flash Eurozone PMI Composite Output Index 45.9 (46.3 in August). 39-month low. Flash Eurozone Services PMI Activity Index 46.0 (47.2 in August). 38-month low. Flash Eurozone Manufacturing PMI (45.1 in August). Six-month high.
(3) (1)

at at

April, the service sector saw the largest drop in activity since July 2009. The faster rate of decline in output reflected an accelerated rate of loss of new business – the largest monthly fall since May 2009. Manufacturing and services saw identical, steep rates of contraction, with the decline in services the largest since June 2009. Manufacturers reported a drop of marginally greater magnitude than in August, though new export orders fell at a slightly slower rate. Core v. Periphery PMI Output Indices
Composite Output, sa, 50 = no change on previous month 70

(2)

at 46.0
(4)

Flash Eurozone Manufacturing PMI Output Index at 45.5 (44.4 in August). Five-month high.
Data collected 12-19 September.

The Markit Eurozone PMI® Composite Output Index fell from 46.3 in August to 45.9 in September, according to the preliminary ‘flash’ reading, based on around 85% of usual monthly replies. The index therefore signalled that the private sector economy contracted for the twelfth time in the past 13 months, with the rate of decline accelerating slightly to reach the fastest since June 2009. The September reading rounds of the weakest quarter since the second quarter of 2009, with the average PMI reading for the third quarter at 46.2, down from an average of 46.4 in the second quarter. Markit (Flash) Eurozone PMI and GDP
PMI Output Index, sa, 50 = no change 65 60 1.0 55 50 45 40 0.0 GDP, %q/q 2.0

60

50

40

Germany
30

France Rest of Eurozone

20 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: Markit

The falls in production and new orders were widespread across the single currency area, although a divergence was seen among the region’s two largest economies. France saw output and new orders both fall at the fastest rates since April 2009, with rates of decline accelerating markedly in both manufacturing and services. Germany meanwhile saw the rate at which output fell ease substantially to show only a modest decline, and the weakest since output began contracting in May. The rate of loss of new orders also eased. Services even saw a marginal upturn in activity for the first time since May, though the manufacturing sector continued to contract, led by a further sharp fall in new export

-1.0

PMI
35 30 1999 2000 2001 2002 2003 2004 2005

GDP

-2.0

-3.0 2006 2007 2008 2009 2010 2011 2012

Source: Markit, Eurostat. GDP = gross domestic product

Manufacturing and services saw similarly steep rates of decline in September. However, while manufacturing output fell at the slowest rate since

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© Markit Economics Limited 2012

orders. Outside of France and Germany, the region saw output fall at the steepest rate since May 2009, with the rate of loss of new orders also accelerating. Employment fell for the ninth consecutive month across the Eurozone, dropping at the fastest rate since January 2010. The rate of job losses in services was the highest since November 2009 and steeper than the cut seen in manufacturing, which was the lowest for five months. While only a marginal fall in employment was seen in Germany, French payroll numbers were cut at the fastest rate since November 2009, and elsewhere across the region employment showed the largest monthly fall since July 2009. Core v. Periphery PMI Employment Indices
Composite Employment sa, 50 = no change on previous month 70

Commenting on the flash PMI data, Chris Williamson, Chief Economist at Markit said: “The Eurozone downturn gathered further momentum in September, suggesting that the region suffered the worst quarter for three years. The flash PMI is consistent with GDP contracting by 0.6% in the third quarter and sending the region back into a technical recession. ”We had hoped that the news regarding the ECB’s intervention to alleviate the debt crisis would have lifted business confidence, but instead sentiment appears to have taken a turn for the worse, with businesses the most gloomy since early-2009 due to ongoing headwinds from slower global growth. This gloom is clearly reflected in headcounts falling at the fastest rate since January 2010 as companies seek to adjust to weaker demand. “At the same time, input costs have risen markedly, linked largely to higher oil prices. Weak demand has meant companies have been unable to pass these costs on to customers, meaning output prices fell again in September. The combination of higher costs and lower selling prices will inevitably hit profit margins. “Some good news came from an easing in the rate of contraction in Germany, though the rate of decline accelerated markedly in France and a deepening downturn was also evident in the periphery. It remains too early to say, however, whether Germany will continue to buck the trend, especially as it continued to see a strong rate of loss of new orders in both manufacturing and services.” -Ends-

60

50

40

Germany
30

France Rest of Eurozone

20 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Source: Markit

Backlogs of orders fell across the region at the fastest rate since July 2009, falling at stronger rates in both manufacturing and services and suggesting employers may seek further job cuts in October unless demand revives. Service providers’ views on the 12-month outlook also deteriorated, becoming the most downbeat since March 2009. Steep falls in confidence were seen in both Germany and France, with a further deterioration also seen across the rest of the region as a whole. The September surveys also found an increase in price pressures. Input costs rose that the fastest rate since April, driven higher by rising oil, fuel and food prices in particular. Manufacturers’ input costs and selling prices both rose for the first time in four months. However, although input costs in the service sector showed the largest rise for six months, prices charged fell at the fastest rate since February 2010, attributable to the weakness of demand.

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© Markit Economics Limited 2012

Summary of September data
Output Composite Output falls for eighth month running, fastest rate since June 2009 (45.9). Activity falls at fastest rate since July 2009. Production declines at weakest rate in five months. New business declines at fastest rate since May 2009. New business down for thirteenth month running. New orders fall for sixteenth month running, at broadly similar pace to August. Outstanding business declines at strongest rate in over three years. Fifteenth successive monthly decline. Backlogs fall at strongest rate since July. Jobs decline at strongest rate since January 2010. Employment declines at fastest rate since November 2009. Employment declines at weakest rate in four months. Input price inflation at fivemonth high. Input price inflation at six-month high. First rise in input prices for four months. Output prices fall at weakest rate in four months. Charges down for tenth month running. First rise in output prices for four months. PMI below 50.0 for fourteenth month running, but at sixmonth high of 46.0.

Output
Eurozone PMIs - Output 65 60 55 50 45 40 35 30 Services Manufacturing Composite

Services Manufacturing

New Orders

Composite Services Manufacturing

1 998 1 999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201 201 201 0 1 2

New business
Eurozone PMIs - New Business 65 60 55 50 45 40 35 30 25
1 998 1 999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201 201 201 0 1 2

Backlogs of Work Composite

Services Manufacturing

Services

Manufacturing

Composite

Employment

Composite Services Manufacturing

Employment
Eurozone PMIs - Employment 60 55 50 45 40

Input Prices

Composite Services Manufacturing

35 Services 30
1 998 1 999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201 201 201 0 1 2

Manufacturing

Composite

Output Prices

Composite Services Manufacturing

Input prices
Eurozone PMIs - Input Prices 90 80 70 60 50 40 30 20 Services Manufacturing Composite

PMI(3)

Manufacturing

1 998 1 999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201 201 201 0 1 2

Output prices
Eurozone PMIs - Output Prices 65 60 55 50 45 40 35 Services Manufacturing Composite

1 998 1 999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201 201 201 0 1 2

Source: Markit.

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© Markit Economics Limited 2012

For further information, please contact: Markit Chris Williamson, Chief Economist Telephone +44-20-7260-2329 Mobile +44-779-555-5061 Email chris.williamson@markit.com Caroline Lumley, Corporate Communications Telephone +44-20-7260-2047 Mobile +44-78-1581-2162 Email caroline.lumley@markit.com Note to Editors:
Final September data are published on 1 October for manufacturing and 3 October for services and composite indicators. The Eurozone PMI® (Purchasing Managers' Index®) is produced by Markit and is based on original survey data collected from a representative panel of around 5,000 companies based in the euro area manufacturing and service sectors. National manufacturing data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. National services data are included for Germany, France, Italy, Spain and the Republic of Ireland. The flash estimate is typically based on approximately 85%–90% of total PMI survey responses each month and is designed to provide an accurate advance indication of the final PMI data. The average differences between the flash and final PMI index values (final minus flash) since comparisons were first available in January 2006 are as follows (differences in absolute terms provide the better indication of true variation while average differences provide a better indication of any bias): Average Average difference Index difference in absolute terms Eurozone Composite Output Index1 0.0 0.2 0.0 0.2 Eurozone Manufacturing PMI3 0.1 0.3 Eurozone Services Business Activity Index2 The Purchasing Managers’ Index® (PMI®) survey methodology has developed an outstanding reputation for providing the most up-to-date possible indication of what is really happening in the private sector economy by tracking variables such as sales, employment, inventories and prices. The indices are widely used by businesses, governments and economic analysts in financial institutions to help better understand business conditions and guide corporate and investment strategy. In particular, central banks in many countries (including the European Central Bank) use the data to help make interest rate decisions. PMI® surveys are the first indicators of economic conditions published each month and are therefore available well ahead of comparable data produced by government bodies. Markit do not revise underlying survey data after first publication, but seasonal adjustment factors may be revised from time to time as appropriate which will affect the seasonally adjusted data series. Historical data relating to the underlying (unadjusted) numbers, first published seasonally adjusted series and subsequently revised data are available to subscribers from Markit. Please contact economics@markit.com.
Notes 1. The Composite Output PMI is a weighted average of the Manufacturing Output Index and the Services Business Activity Index. 2. The Services Business Activity Index is the direct equivalent of the Manufacturing Output Index, based on the survey question “Is the level of business activity at your company higher, the same or lower than one month ago?” 3. The Manufacturing PMI is a composite index based on a weighted combination of the following five survey variables (weights shown in brackets): new orders (0.3); output (0.25); employment (0.2); suppliers’ delivery times (0.15); stocks of materials purchased (0.1). The delivery times index is inverted. 4. The Manufacturing Output Index is based on the survey question “Is the level of production/output at your company higher, the same or lower than one month ago?”

Rob Dobson, Senior Economist Telephone +44-1491-461-095 Mobile +44-782-691-3863 Email rob.dobson@markit.com

About Markit Markit is a leading, global financial information services company with over 2,300 employees. The company provides independent data, valuations and trade processing across all asset classes in order to enhance transparency, reduce risk and improve operational efficiency. Its client base includes the most significant institutional participants in the financial market place. For more information, see http://www.markit.com/en/. About PMIs Now available for 32 countries and key regions including the Eurozone, Purchasing Managers’ Index® (PMI®) surveys have become the most closely-watched business surveys in the world, favoured by central banks, financial markets and business decision makers for their ability to provide up-to-date, accurate and often unique monthly indicators of economic trends. To learn more go to www.markit.com/economics.

The intellectual property rights to the Flash Eurozone PMI® provided herein is owned by Markit Economics Limited. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit’s prior consent. Markit shall not have any liability, duty or obligation for or relating to the content or information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers' Index® and PMI® are registered trade marks of Markit Economics Limited. Markit and the Markit logo are registered trade marks of Markit Group Limited.

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