Eurozone business activity in October adds to evidence of recession

The euro zone is likely heading into recession as business activity contracted at the fastest pace in nearly two years this month as the cost-of-living crisis keeps consumers wary and demand dampens, a survey showed on Monday. thursday (24th).

Factories have been particularly hard hit by rising energy prices, while supply chains are still recovering from the coronavirus pandemic and the blow from the Russian invasion of Ukraine.

The S&P Global Composite Purchasing Managers Index (PMI) dropped to 47.1 from 48.1 in September in its preliminary reading, below a Reuters poll forecast of 47.5.

October was the fourth month below the 50 mark that separates growth from contraction and marked the lowest reading since November 2020.

“The preliminary October PMIs provide further evidence that the eurozone is sliding into a fairly deep recession, but that inflationary pressures remain intense,” said Andrew Kenningham of Capital Economics.

Eurozone inflation hit a record 9.9% in September, according to data released last week, and with prices rising sharply, demand has weakened considerably, pushing the composite new business index to a nearly two-year low.

To try to fight inflation at nearly five times its target, the European Central Bank has started raising interest rates and is expected to rise again by 0.75 percentage point on Thursday.

The bloc’s services PMI fell to 48.2 from 48.8 in September, in line with the Reuters poll but the lowest point in 20 months.

The industry PMI slipped from 48.4 to 46.6, its lowest since May 2020 and below all Reuters poll forecasts.

Germany

Germany’s composite PMI, which encompasses the industrial and service sectors, fell from 45.7 in September to 44.1 in October, reaching the lowest level in 29 months and remaining below the 50 barrier that signals activity contraction, according to preliminary data released this Monday by S&P Global.

Only the German industrial PMI dropped from 47.8 to 45.7 in the same period, touching the lowest level in 28 months and coming well below the expectations of analysts consulted by the The Wall Street Journalwhich predicted a drop to 47.1.

Germany’s Services PMI declined from 45 in September to 44.9 in October, its lowest level in 29 months but in line with market consensus.

UK

The UK composite PMI fell from 49.1 in September to 47.2 in October, hitting a 21-month low and remaining below the 50 barrier that signals a contraction in activity.

The October preview was well below the expectations of analysts consulted by the The Wall Street Journalwhich predicted a decline in the composite PMI to 48.7.

Only the UK services PMI declined from 50 to 47.5 in the same period, also touching a 21-month low and signaling that the sector has emerged from stagnation and started to contract. The market consensus was for a much smaller pullback at 49.5.

The British industrial PMI fell from 48.4 in September to 45.8 in October, reaching the lowest level in 29 months. In this case, the projection was for a slight reduction to 48.2.