Euro zone October business activity takes another inflation hit -PMI

LONDON, Oct 24 (Reuters) – Eurozone business activity contracted at its fastest pace in nearly two years in October as the cost-of-living crisis kept consumers cautious and dampened demand, according to a survey that added evidence the bloc get in. a recession.

Factories have been particularly hard hit by rising energy prices and supply chains still recovering from the coronavirus pandemic, having been affected by Russia’s invasion of Ukraine.

S&P Global’s composite purchasing managers’ index (PMI), seen as a good guide to overall economic health, fell to 47.1 from 48.1 in September, below expectations for 47.5 in a Reuters poll.

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October was the fourth month below the 50 mark that separates growth from contraction, and was the lowest reading since November 2020.

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“The eurozone economy looks set to contract in the fourth quarter given the steep output loss and the picture of deteriorating demand seen in October, adding to speculation that a recession looks increasingly inevitable,” said Chris Williamson, chief economist of business at S&P Global.

“Demand is falling sharply, and companies are becoming increasingly worried about high inventories and weaker-than-expected sales, especially as winter approaches. The risks are therefore tilted towards recession accelerating towards the end of the year “.

Inflation was a record 9.9 percent in September, data showed last week, and as prices rose sharply, demand fell sharply. The composite index of new business fell to a near two-year low of 45.0 from 46.3.

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To try to combat inflation nearly five times its target, the European Central Bank has started raising interest rates and is expected to do so by another 75 basis points on Thursday, draining the spending power of indebted consumers.

A PMI covering the bloc’s dominant services industry fell to 48.2 from 48.8 in September, according to a Reuters poll, but the lowest point in 20 months.

Suggesting that inflation will not ease significantly anytime soon, both the service input and output price indices were near record highs. One entry prices rose to 77.5 from 77.4.

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The PMI for manufacturing fell to 46.6 from 48.4, the lowest level since May 2020 and below all forecasts in a Reuters poll, which had predicted 47.8. A gauge of output, which feeds the composite PMI, fell to 44.2 from 46.3.

With the war never-ending, optimism about the coming year among factory purchasing managers collapsed further. The index of future production fell to 44.8 from 45.3, the lowest level since May 2020, when 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.

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