Eurozone Composite PMI Dips To 51.9

The eurozone private sector maintained its fragile and modest economic recovery at the start of the final quarter. October PMI data from Markit signalled that business activity in the currency union expanded for the fourth successive month.


Although a slight dip in the final Markit Eurozone PMI® Composite Output Index to 51.9 in October, from a 27-month high of 52.2 in September, was a disappointment in itself, the index was above the
flash estimate (51.5). This suggested that the slowdown was less marked than originally thought.

The latest output expansion was led by accelerated growth at manufacturers. Service sector business activity rose for the third month running, but the pace of increase was slower than in September.

October saw growth in Germany continue to track at a pace close to August’s seven-month peak, while the stabilisation in France was maintained and the upturn in the periphery took further hold. Growth was also maintained in Italy, while Spain registered a stable trend in output following September’s mild contraction.

Growth of eurozone output was supported by a further expansion of new business in October. Demand growth accelerated in Germany (to a two month high) and Spain (42-month record), but slowed slightly in Italy. New orders declined in France following a marginal increase in September.

The weaker growth of new order inflows led to a further drop in payroll numbers. October saw employment fall for the twenty-second successive month, with the rate of loss accelerating slightly since September. Modest cuts were reported in both the manufacturing and service sectors. Ireland reported strong job creation, while France saw a slight increase following a 19-month sequence of cuts. This was offset by a marginal decrease in German employment and further solid job losses in both Italy and Spain.

Input cost inflation hit a nine-month high in October, but nonetheless remained historically weak. Firms’ pricing power was muted in comparison, with average selling prices declining for the nineteenth month in a row. Only Germany reported an increase in output charges.

At 51.6 in October, from 52.2 in September, the Services Business Activity Index signalled an increase in business activity for the third month running. Although the rate of expansion was slower than the previous month, the final index reading was above the earlier flash estimate (50.9).

The upward revision between the flash and final releases reflected broadly similar revisions to the readings for Germany, France and (on average) outside of the big-two nations.

Ireland saw a marked acceleration in output growth in October, whereas rates of increase eased in Germany, Italy and France. In contrast, Spain saw a further modest decrease in business activity.

The latest expansion in service sector output was underpinned by a further increase in intakes of new business. New orders rose for the third consecutive month, but only moderately and to a lesser extent than in September.


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