LONDON, October 24, 2011 – Eurozone business activity contracted at the fastest pace in two years in October, as a cost-of-living crisis made consumers wary and dampened demand, a survey showed entering the bloc. failure.
Factories have been hit particularly hard by rising energy prices and supply chains reeling from the coronavirus outbreak following Russia’s invasion of Ukraine.
S&P Global’s flash Composite Purchasing Managers’ Index (PMI), seen as a good guide to overall economic health, fell to 47.1 from 48.1 in September, below the 47.5 expected in a Reuters poll.
October was below the 50 mark, marking the fourth straight month of growth and contraction, and the lowest reading since November 2020.
Chris Williamson, chief business economist at S&P Global, said: “The eurozone economy looks set to contract in the fourth quarter.
“Demand is slowing down significantly and companies are worried about high production and weaker than expected sales, especially as winter approaches. So the risks are towards a decline towards the end of the year.”
Last week, inflation was a record of 9.9% in September, the data showed last week, and demand has weakened significantly as inflation has increased significantly. The composite new business index fell from 46.3 to a near two-year low of 45.0.
The European Central Bank has begun raising interest rates to try and combat inflation, which is nearly five times higher than planned, and is expected to do so by another 75 basis points next Thursday.
The PMI, which covers the bloc’s core services industry, fell to 48.2 from September’s 48.8, but the lowest point in 20 months, in line with a Reuters poll.
Inflation is unlikely to slow down significantly in the near term, with both the input and output price indices of services reaching record highs. Input price one rose to 77.5 from 77.4.
The manufacturing PMI fell from 48.4 to 46.6, the lowest since May 2020 and below all forecasts in a Reuters poll, which had predicted 47.8. The index output that feeds into the composite PMI fell to 44.2 from 46.3.
Optimism for the coming year among factory purchasing managers has been further dampened by the seemingly endless war. The future output index fell from 45.3 to 44.8, the lowest since May 2020, as the COVID-19 pandemic tightened its grip on the world.
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Reporting by Jonathan Cable; Edited by John Stonestreet
Our Standards: The Thomson Reuters Trust Principles.
