Business activity in the Euro zone has once again stagnated this month, remaining in contraction as both domestic and international demand falters. A survey released on Thursday indicates that while firms have kept price increases to a minimum, the overall economic environment remains challenging.
The HCOB’s preliminary composite Purchasing Managers’ Index (PMI) for the Euro zone, compiled by S&P Global, edged up slightly to 49.7 in October, up from 49.6 in September. However, it continues to fall below the critical threshold of 50, which demarcates growth from contraction, marking the second consecutive month of contraction.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, stated, “The Euro zone is stuck in a bit of a rut, with the economy contracting marginally for the second month in a row.” He noted that the ongoing decline in manufacturing is being somewhat offset by modest gains in the services sector.
The new business composite index saw only a marginal increase from September’s eight-month low of 47.7, coming in at 47.8. This trend is echoed in the new export business index, which also registered below the 50 mark, indicating ongoing weakness in trade among Euro zone countries.
In the Euro zone’s dominant services sector, growth has once again slipped, with the PMI decreasing to 51.2 from 51.4, contrary to expectations that it would rise to 51.5. This decline occurred despite firms only slightly raising their prices, with the services output prices index just above September’s 41-month low, now at 52.6.
Last week, the European Central Bank (ECB) reduced interest rates for the third time this year, citing improved control over inflation while acknowledging a deteriorating economic outlook.
Manufacturing activity continues to face challenges, although the contraction is not as severe as in September. The factory PMI improved to 45.9 from 45.0, surpassing expectations for a modest increase to 45.3. An index measuring output also saw a slight recovery, rising to 45.5 from 44.9.
Despite these slight improvements, optimism about future economic conditions is waning. The future output index fell to a 12-month low of 52.3, down from 53.6, highlighting concerns regarding the Euro zone’s economic trajectory.
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