Eurozone Private Sector Activity Shrinks

(RTTNews) - Eurozone private sector activity shrank moderately in October on continuing contraction in manufacturing, flash survey data from S&P Global showed on Thursday.

The HCOB flash composite output index rose slightly to 49.7 in October from 49.6 a month ago. The reading was seen at 49.8.

Business activity in the currency bloc dropped marginally for the second straight month.

The marginal reduction in overall business activity masked a continued divergence between the manufacturing and services sectors.

The flash services Purchasing Managers' Index unexpectedly fell to 51.2 from 51.4 a month ago. The score was seen at 51.5.

The manufacturing PMI improved to a five-month high of 45.9 from 45.0 in the prior month. The score was seen at 45.1.

Output was scaled back in response to a weakening demand environment, with new orders down for the fifth straight month.

Companies responded to lower workloads by lowering employment to the largest degree in almost four years, while business confidence dropped to an 11- month low.

On the price front, input costs increased at the slowest pace since November 2020 and output charge inflation similarly eased to a 44-month low.

"The eurozone is stuck in a bit of a rut, with the economy contracting marginally for the second month running," said Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said.

The European Central Bank is likely to cut key interest rates by just 25 basis points in December, rather than the 50 basis points some have been talking about, the economist added.

At country level, the deterioration of the situation in France was met by a slight moderation in the decline in Germany. The rest of the eurozone actually saw output increase at the fastest pace in four months.

France's private sector continued to shrink in October as both manufacturers and service providers reported lower output.

The flash composite output index unexpectedly fell to a nine-month low of 47.3 from 48.6 in the previous month. This was the lowest score since the start of this year. The expected level was 49.0.

The manufacturing PMI posted 44.5 compared to 44.6 in the previous month. The score was seen at 44.9.

The flash services PMI hit a seven-month low of 48.3, down from 49.6 in the prior month and also remained below economists' forecast of 49.8.

Germany's private sector downturn slowed marginally in October as output dropped at a slightly slower pace and business expectations picked up. The flash composite output index rose to 48.4 in October from September's seven-month low of 47.5. The score was also above forecast of 47.6.

The services PMI hit a three-month high of 51.4, while the score was seen at 50.6, unchanged from September.

The manufacturing PMI climbed to a three-month high of 42.6 from 40.6 in the previous month. Economists had forecast the index to rise marginally to 40.7.