Eurozone PMI

Eurozone

Eurozone: Business activity in the Eurozone improves at the outset of Q4

October 23, 2015

Business activity in the Eurozone improved in October, buttressed mainly from businesses in the services sector. The preliminary Eurozone Composite Purchasing Managers’ Index (PMI) elaborated by Markit rose from a revised 53.6 in September (previously reported: 53.9) to 54.0 in October. October’s result defied the drop to 53.4 the markets had expected and confirmed that European businesses remain on positive a trajectory as the indicator continues to hover above the 50-threshold that separates expansion from contraction in business activity.

According to Markit, the better-than-expected result suggests that economic activity regained momentum at the outset of the fourth quarter and although it was slightly below the print seen in August, it still marks one of the strongest expansions in over four years. October’s reading stemmed from an increase in output in both the manufacturing and services sectors, although growth in the latter once again recorded faster growth. In addition, new businesses rose in October, reaching a six-month high, and as work continues to pile up, businesses decided to hire more staff. Finally, the October survey showed that inflationary pressures continue to be contained. At a country level, the PMI rose in both Germany and France in October, with the former enjoying a faster pace of expansion. The rest of the region also saw an improvement in October, but growth, “remained below the pace seen earlier in the year.”

October’s positive result is welcoming news that the Eurozone recovery remains in place in the last quarter of the year. However, Markit stated that, “the PMI remains at a level signaling a modest 0.4% quarterly rise in GDP, suggesting the region will struggle to attain more than 1.5% overall growth for 2015.”

In its September assessment of the economy, the European Central Bank (ECB) cut its GDP growth forecasts for the common-currency bloc’s economy. The ECB now expects the Eurozone economy to increase 1.4% this year, which was revised down from a previous 1.5% estimate. For 2016, the ECB now sees economic growth rising to 1.7%, which was down the 1.9% expected earlier in June. FocusEconomics Consensus Forecast panelists expect the Euro area economy to expand 1.5% in 2015, which is unchanged from last month’s forecast. For 2016, panelists expect the economy to expand 1.7%, also unchanged from last month’s Consensus.


Author:, Senior Economist

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Euro PMI October 2015

Note: Markit Purchasing Managers’ Index (PMI) Composite Output. A reading above 50 indicates an expansion in business activity while a value below 50 points to a contraction
Source: Markit


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