Eurozone Private Sector Activity Shrinks Most In Nearly 3 Years

Euro area private sector activity declined at the fastest pace in nearly three years in October due to the sharp fall in business intakes amid the gloomier economic outlook.

The HCOB composite output index posted 46.5 in October, in line with the flash estimate, final results of the purchasing managers’ survey by S&P Global showed on Monday.

The score eased from 47.2 in September and signaled the biggest fall in nearly three years.

The contraction in factory production levels remained in line with that seen in September, while a sharper downturn was seen in the service sector.

The services Purchasing Managers’ Index, or PMI, dropped to a 32-month low of 47.8 in October, as initially estimated, from 48.7 in September. The score has remained below the neutral 50.0 for the third straight month.

New orders for both goods and services declined at the quickest pace since May 2020. Orders from abroad showed one of the steepest fall since the series began in 2014.

Outstanding business fell at a rate that was broadly in line with September’s 39-month record.

Due to a marked fall in capacity pressures, companies held back recruitment. As a result, employment stagnated ending a 32-month sequence of job creation.

Business sentiment remained subdued despite improving slightly from September’s ten-month low.

On the price front, the PMI survey showed a cooling of cost pressures faced by companies after two consecutive months of intensifying inflation.

The pace of rise in operating expenses was weaker than September’s four-month high. Output price inflation was the lowest since February 2021.

With the exception of Spain, declines were broad-based across the euro area constituents monitored. Germany and France continued to shrink sharply and Italy registered the biggest deterioration for a year.

Reflecting declines in both manufacturing production and services activity, Germany’s private sector contracted for the fourth straight month in October.

The final HCOB composite output index fell to 45.9 in October from 46.4 in September. The flash score was 45.8. At 48.2, the services PMI eased from 50.3 in September and the preliminary reading of 48.0.

France’s private sector activity showed little signs of improvement following September’s contraction in activity, which was the strongest in nearly three years.

The HCOB composite output index registered 44.6 in October, only slightly higher than September’s 34-month low of 44.1. The flash score was 45.3.

The services PMI registered in firm sub-50.0 territory in October at 45.2 compared to 44.4 in September and preliminary reading of 46.1.

Italy’s private sector fell deeper into the contraction zone in October with faster falls in manufacturing and services output.

The composite output index dropped to a one-year low of 47.0 from 49.2 in the prior month. The services business activity index posted 47.7, down from 49.9 in September.

Spain’s private sector stagnated as growth in services activity was offset by sustained weakness in manufacturing.

The composite output index hit 50.0, little moved from 50.1 in September. The business activity index logged 51.1 in October compared to 50.5 in the previous month.

Spain’s HCOB services business activity index registered 51.1 in October, which was up from 50.5 in the previous month.

“All in all, GDP of the Eurozone may well fall in the fourth quarter,” Hamburg Commercial Bank Chief Economist Cyrus de la Rubia said.

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