Prior 53.9
Services PMI 51.7 vs 52.5 expected
Prior 52.9
Composite PMI 52.8 vs 53.3 expected
Prior 53.8
Key findings:
Economic activity softens in October
Comment:
Phil Smith, Economics Associate Director at S&P Global Market Intelligence:
“October’s flash PMI results encouragingly showed a sustained upturn in business activity across Germany, although a slowdown in growth underscored that the recovery in the eurozone’s largest economy remains fragile. Inflows of new work rose only modestly and at the slowest rate for three months at the start of the fourth quarter, with a stalling of new business growth in the service sector highlighting the ongoing headwinds to demand from elevated inflation and uncertainty.
“Labour market conditions continue to show a very gradual improvement, reflecting a steady but modest pace of job creation among services providers alongside an increasingly stable picture in the manufacturing sector.
“Whilst goods producers continued to see business conditions improve, aided by sustained growth in export sales and the filtering through of increased defence and infrastructure spending, a renewed surge in cost pressures has dampened expectations across the sector, with the two likely to remain intrinsically linked in the months ahead.”
The market is being proved right as the PMIs are showing a slowdown in economic activity. Germany’s private sector continued to expand in October, but the pace of economic activity slowed noticeably, with the Composite PMI falling to 52.8 from 53.8 in September. Although the index remained above the 50 threshold separating expansion from contraction, the slowdown was broad-based, with both manufacturing output and services activity losing momentum. New business growth also eased to a three-month low, while demand in the services sector stalled amid delayed customer decisions and tighter client budgets.
The outlook for the coming months also points to increasing downside risks. Manufacturing firms reported a notable deterioration in business confidence, with expectations falling to their lowest since July as rising oil prices and raw material costs intensified concerns about margins and future activity. Meanwhile, the weakness in services demand and the slowdown in new orders could weigh on output growth if businesses become more cautious about spending and hiring.
The combination of weaker French and German PMIs led to a dovish repricing for the ECB as expectations for further tightening in light of an economic slowdown are getting challenged.
This article was written by Giuseppe Dellamotta at investinglive.com.
