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Financial News: Eurozone Private Sector Economy Stagnates In October

Eurozone Private Sector Economy Stagnates In October

11/04/2020 - 06:34:00 (RTTNews)

(RTTNews) - The euro area private sector recovery halted in October as the containment measures were reintroduced to combat the second wave of Covid-19 infections, final survey results from IHS Markit showed Wednesday.

The composite output index fell to 50.0 in October from 50.4 in September. The flash score was 49.4. A score above 50 indicates expansion, while a reading below 50 suggests contraction.

The headline index masked the continuation of a two-speed economy in October. Manufacturing output grew the most in over two-and-a-half years. In stark contrast, service sector activity contracted at the fastest pace since May.

The services Purchasing Managers' Index dropped to 46.9 in October from 48.0 in September. The score was revised from 46.2.

Data showed that overall incoming new business dropped for the first time in four months in October. Nonetheless, there was some positive news on export sales.

Employment declined for the eighth successive month in October albeit at the weakest pace in the current sequence.

On the price front, the survey showed that input costs logged the strongest rise since February. Meanwhile, output charges continued to fall as the challenging business environment weighed on pricing power.

Looking ahead to the coming twelve months, business confidence remained in positive territory in October.

With lockdown measures being tightened, it is becoming increasingly hard to see how the eurozone economy will avoid falling back into decline, especially as some countries, including France, Italy and Spain, are already contracting again, Chris Williamson, chief business economist at IHS Markit said. Germany was the only nation to register an expansion in private sector activity, with growth reaching a three-month high. The composite output index rose to 55.0 in October from 54.7 in September. The flash score was 54.5.

Meanwhile, Germany's service sector returned to contraction zone as rising Covid-19 cases weighed on demand. The services PMI came in at 49.5 versus 50.6 in September and the flash reading of 48.9.

All other nations registered contractions in activity since the previous month with Spain registering by far the sharpest fall, followed by France. Italy and Ireland recorded marginal declines in activity.

The French private sector posted its biggest decline since May. The composite output index fell to 47.5 in October from 48.5 in September. This was above the flash 47.3. The services PMI decreased to 46.5, as initially estimated, from 47.5 a month ago.

The PMI signaled a renewed contraction in the private sector output in October. At 49.2, the composite output index fell from 50.4 in September. At the sector level, a faster reduction in services activity outweighed a sharp uptick in manufacturing output.

The services PMI slid to a four month low of 46.7 in October from 48.8 a month ago. Spain's private sector economy contracted for the third month in a row. The composite PMI slid to a five-month low of 44.1 from 44.3 in September. The services PMI came in at 41.4 in October, down from 42.4 in the prior month.

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