Italy's service sector growth nearly stagnated in September, with the HCOB Purchasing Managers' Index for services dropping to 50.5 from 51.4 in August.

Similarly, Germany's services sector growth also slowed for the fourth consecutive month in September, indicating a trend towards stagnation.

This decline marks the sixth consecutive decrease in the index since it peaked at 54.6 in March.

The September reading is just above the 50 mark, which separates growth from contraction, and fell short of the median forecast of 51.0 from a Reuters survey.

The composite Purchasing Managers' Index, which encompasses both services and manufacturing, fell to 49.7 from 50.8, signaling contraction for the first time this year.

In addition, Italy's employment index edged down to 50.9 from 51.2, reflecting a slowdown in hiring practices.

A related survey revealed that Italy's smaller manufacturing sector has contracted for six consecutive months as of September.

The new business sub-index also decreased to 49.3 from 49.8, indicating further contraction in this area.

Despite the overall slowdown, staffing cuts in the services sector increased in September, although they remained moderate.

Expectations for the year ahead are notably pessimistic, with 25% of survey participants expressing optimism compared to 23% who are pessimistic.

Concerns about a looming recession are prevalent among survey participants, highlighting the economic uncertainty.

Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, pointed out a significant decrease in incoming orders as a major concern for the sector.