Eurozone Private Sector Shrinks Most In Almost 2 YearsNovember 11, 2022
The euro area private sector contracted at the fastest pace in almost two years in October signaling that the currency bloc is sliding into a recession, final survey results from S&P Global showed on Friday.
The final composite output index fell to 47.3 in October from 48.1 in September. The score was slightly above the flash 47.1. The latest reading was the lowest since November 2020.
The PMI reading has remained below the neutral 50.0 mark for the fourth straight month.
The downturn reflected stronger contractions across both the manufacturing and service sectors, with the more significant drag coming from the former.
The services Purchasing Managers’ Index fell to a 20-month low of 48.6 from 48.8 a month ago. The flash score was 48.2.
The survey respondents cited fall in new orders, high prices and generally weak underlying demand conditions as factors weighing on private sector activity. Challenging global economic conditions led to a fall in output.
Companies were downbeat towards the year ahead due to persistently high inflation, the energy crisis, a protracted economic downturn and rising interest rates.
Employment increased for twenty one successive months but the rate of growth was the weakest seen across the last year-and-a-half.
Input cost inflation eased from the prior month but remained sharper than most months seen before 2022. Selling prices rose in response to input prices, albeit to a lesser degree.
After a weak third quarter of PMI and official GDP data, the latest survey results for the start of the fourth quarter suggest the eurozone economy is now headed for a winter recession, Joe Hayes, a senior economist at S&P Global Market Intelligence said.
“A substantial worsening of economic conditions in the coming months may give policymakers a difficult decision to make with regards to the path of monetary tightening, for fear of being too aggressive and prolonging the downturn,” said Hayes.
Although France reported a rise in private sector business activity level, the rate of growth slowed from September. The picture was bleak elsewhere as Spain, Italy and Germany, all recorded contractions in output.
Germany was the worst performer once again in October, with the composite output index easing to the lowest since May 2020. The corresponding indicator came in at 45.1 versus 45.7 in the previous month. Nonetheless, the score was well above the preliminary level of 44.1.
Likewise, the services PMI dropped less-than-estimated to 46.5 from September’s 28-month low of 45.0. The initial estimate was 44.9.
France private sector expanded only fractionally in October. The composite PMI eased to 50.2, the lowest since March 2021, from 51.2 in September. The reading was initially seen at 50.0.
The services PMI posted 51.7 versus 52.9 in September and the flash 51.3.
The downturn in Italy’s private sector accelerated in October. The composite output index slid to a 22-month low of 45.8 from 47.6 in the previous month. The private sector shrank for the fourth straight month.
At 46.4, the services PMI dropped from 48.8 in September. The reading signaled the quickest rate of contraction since January 2021.
Spain’s private sector activity declined for the second straight month in October. The composite PMI registered 48.0, down from 48.4 in the previous month. Meanwhile, the services index rose to 49.7 from 48.5 in September.
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