Eurozone PMI growth cools in October

Traders at a busy desk monitor eurozone PMI data easing in October and market moves in EURUSD and STOXX50E

Key Points

01Eurozone Composite PMI slipped to 51.9 in October, a four‑month low
02Growth stayed above the 50 threshold but missed the 52.7 consensus
03France’s private sector fell back into contraction, led by services
04Rising input costs, especially in manufacturing, kept inflation pressures high

Eurozone growth slows as composite PMI drops to 51.9

Business activity in the euro area expanded at a slower pace in October, with the S&P Global Flash Eurozone Composite PMI Output Index declining to 51.9 from 53.1 in September. The reading, based on approximately 85% of usual survey responses, marked a four‑month low and fell short of expectations for 52.7.

S&P Global said overall business activity increased for a fourth consecutive month, but the pace of growth was the weakest in that sequence.

Services and manufacturing both lose momentum

Weaker growth was evident in both the services and manufacturing sectors. The Flash Eurozone Services PMI Business Activity Index fell to 51.7 in October from 53.0 in September, a two‑month low that still signalled expansion but at a reduced pace. Manufacturing output also cooled, with the Flash Eurozone Manufacturing Output Index slipping to 52.4 from 53.6, a four‑month low.

The headline Flash Eurozone Manufacturing PMI stood at 52.4 in October compared with 52.9 in September, a three‑month low. These readings underscored a broad easing of momentum across the eurozone’s private sector at the start of the quarter, even as overall conditions remained consistent with ongoing, if more modest, growth.

France slips back, Germany holds above 50

Country‑level patterns showed diverging performance among major euro‑area economies. French private sector output returned to contraction in October after recording its first increase in 10 months in September. A renewed drop in business activity in the French services sector was identified as a key drag on overall euro‑area growth, with some of the weakness linked to strikes and unrest disrupting local economies.

By contrast, Germany recorded a fourth straight month with its PMI reading above 50, indicating continued growth. German activity was supported by a stronger‑than‑anticipated performance from manufacturers, helping offset some of the softness stemming from France and moderating but still positive trends across the rest of the eurozone.

Inflation pressures persist as input costs rise

Price dynamics in the October survey highlighted ongoing inflation pressures despite the moderation in growth. A stronger rise in manufacturing input costs, driven in part by higher energy prices, pushed up the overall rate of input price inflation. Companies responded by increasing selling prices to protect margins, although output prices rose at a slower pace than in September.

The combination of sustained growth and stubbornly elevated input costs suggested that higher borrowing costs and more expensive commodities were weighing on demand. New order inflows cooled to show only meagre growth, and hiring came close to stalling, indicating that firms are becoming more cautious as financial conditions tighten and cost pressures re‑intensify.

Key Takeaways

01Eurozone private‑sector growth remained positive but weakened to its slowest pace in four months, signalling a more fragile expansion.
02Services and manufacturing both lost momentum, with French services notably dragging on overall regional performance.
03Rising input costs, especially in energy‑sensitive manufacturing, kept inflation pressures elevated even as output price gains slowed and hiring flattened.

References