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Financial News: Eurozone Private Sector Remains Close To Stagnation

Eurozone Private Sector Remains Close To Stagnation

10/24/2019 - 05:27:00 (RTTNews)

(RTTNews) - The euro area private sector remained close to stagnation in October as manufacturing continued to shrink amid subdued expansion in services activity, survey data from IHS Markit showed Thursday.

The flash composite output index rose slightly to 50.2 in October from 50.1 in September. A score above 50 indicates expansion, and that below 50 suggests contraction. The score was forecast to improve to 50.3.

A further steep decline in manufacturing output was accompanied by one of the weakest service sector expansions since 2014, the survey showed.

The manufacturing Purchasing Managers' Index remained unchanged at 45.7 in October, while it was forecast to climb to 46.0.

The services PMI rose to 51.8 from 51.6 a month ago. The expected reading was 51.9.

"The survey indicates that Mario Draghi's tenure at the helm of the ECB ends on a note of near-stalled GDP, slower jobs growth, near-stagnant prices and growing pessimism about the outlook, piling pressure on Christine Lagarde to drive new solutions to the eurozone's renewed malaise," Chris Williamson, chief business economist at IHS Markit said.

The European Central Bank is set to announce the outcome of its Governing Council meeting today. This will be the final meeting of Mario Draghi as ECB chief.

At the September meeting, the ECB had unveiled a stimulus package that included a fresh round of bond purchases and a 10 basis points cut to the deposit rate to -0.50 percent as well as the introduction of a tiering system for reserve remuneration. The bank is unlikely to announce any monetary policy change today.

The overall picture is one of a feeble eurozone economy ahead of a few decisive months, Bert Colijn, an ING economist said.

The service sector is keeping GDP growth in positive territory for the moment, but growth could easily tip into the negative territory if some of the downside risks materialize, the economist noted.

By country, IHS Markit survey showed that an improved performance in France helped keep the currency bloc out of contraction, alongside a mild easing in the rate of decline in Germany.

Business activity picked up in France, registering the third-largest expansion of output seen over the past 11 months.

Germany's private sector remained in negative zone in October reflecting marked contraction in manufacturing. The composite output index came in at 48.6 in October, little-changed from September's near seven-year low of 48.5 and below the forecast of 48.8.

The services PMI fell to a 37-month low of 51.2 from 51.4 in the previous month. This was also below the expected level of 51.8.

The factory PMI climbed to 41.9 from 41.7 in September. The score was seen at 42.0.

In France, manufacturers logged the fastest growth for four months and service providers reported an improved expansion following a brief slowdown in September.

The composite output index advanced more-than-expected to 52.6 in October from 50.8 in September. The expected reading was 51.0.

The services Purchasing Managers' Index came in at 52.9 versus 51.1 in September. The reading was above the forecast of 51.6.

At 50.5, the factory PMI rose from 50.1 in September. The score was expected to climb marginally to 50.2.

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