Euro Area: Business activity contracts at a sharper pace in October
The flash Eurozone Composite Purchasing Managers’ Index (PMI) fell to 47.1 in October from 48.1 in September, marking the worst reading in almost two years. Therefore, the index moved further below the 50 no-change threshold, signaling a sharper contraction in business conditions compared to the prior month.
October’s decrease was led by more pronounced contractions in manufacturing and services sector activity. New orders fell for the fourth consecutive month and did so at an accelerating pace. Moreover, backlogs of work fell again. On the other hand, the speed of hiring was faster than in September, although only slightly so. On top of this, business sentiment remained considerably downbeat, logging the second-lowest reading since the early days of the Covid-19 pandemic. On the price front, both input and output inflation eased—albeit only marginally—as the impact of easing raw material shortages outweighed substantial energy price increases and upward wage pressures.
Commenting on the release, Chris Williamson, chief business economist at S&P Global Market Intelligence, stated:
“While October’s headline flash PMI is consistent with GDP falling at a modest rate of around 0.2%, demand is falling sharply and companies are increasingly growing worried over high inventories and weaker than expected sales, especially as winter approaches. The risks are therefore tilted towards the downturn accelerating towards the year-end.”