- Prior 48.7
- Manufacturing PMI 43.0 vs 43.7 expected
- Prior 43.4
- Composite PMI 46.5 vs 47.4 expected
- Prior 47.2
The services sector reading is a 32-month low with the composite reading also sliding to a 35-month low. That outlines the sort of plight the Eurozone economy is facing to start Q4 and how heightened recession risks are, no matter the deniability by lawmakers and policymakers alike. HCOB notes that:
“In the Eurozone, things are moving from bad to worse. Manufacturing has been in a slump for sixteen months, services for three, and both PMI headline indices just took another hit. In addition, all subindices point very consistently downwards, too, with only a few exceptions. Overall, this points to another lacklustre quarter. We wouldn’t be caught off guard to see a mild recession in the Eurozone in the second half of this year with two back to back quarters of negative growth.
“The composite PMI fell to 46.5, with the downwards movement in the index driven mostly by service activity which is on a steeper downward slope than the previous month. The unrelenting slide in new and outstanding business is a red flag, signalling more trouble ahead for this sector. Against this backdrop service providers’ hiring came almost to a standstill. Manufacturing companies are not just continuing to cut staff, they are ramping up job shedding plans. This led for the first time since January 2021 to an overall decrease in employment according to the composite PMI. Having said this, the reduction has been mild and given the structural shortage of labour we are not expecting the jobless numbers to spike up all that much in the near future.
“Comparing the top two Eurozone economies, France and Germany are pretty much neck and neck when it comes to the downturn in manufacturing. Both are struggling with output indices in the doldrums and a similar picture for new orders. Employment-wise, French companies are more aggressive in downsizing their staff. Looking at the services sector, the picture might be a little brighter for France, even though the activity index is lower than in Germany. In France, new business is not dropping as fast and companies are even adding jobs at a steady clip instead of cutting them. This more positive view is also supported by our nowcast model which sees France in the growth zone in the year’s second half while Germany is bracing for a recession.
“Price increases in the services sector remain very high in October, the more so if you measure it against previous economic rough patches. There has been only a slight slowing down of inflation in both input prices and prices charged. For the European Central Bank, these figures reinforce the case of a pause in the interest rate cycle instead of thinking aloud about loosening monetary policy.”