Eurozone operations in October suffers another inflation hit – PMI

LONDON (Reuters) Oct 24 of the block delivered a recession.

Factories have been particularly hard hit by rising energy prices and supply chains still recovering from the coronavirus pandemic and being hit by the Russian invasion of Ukraine.

S&P Global’s Flash Composite Purchasing Managers’ Index (PMI), which is seen as a good indicator of overall economic health, fell to 47.1 from 48.1 in September, below expectations of 47.5 in a Reuters -Opinion poll.

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October was the fourth month below 50, separating growth from contraction, and was the lowest since November 2020.

“The eurozone economy is likely to contract in the fourth quarter amid steepening output losses and deteriorating demand in October, adding to speculation that a recession is looking increasingly inevitable,” said Chris Williamson, chief operating officer at S&P Global.

“Demand is falling sharply and companies are increasingly concerned about high inventories and weaker than expected sales, especially as winter approaches.

Inflation hit a record 9.9% in September, data last week showed, and demand weakened significantly as prices soared. The composite new business index fell to a nearly two-year low of 45.0 from 46.3.

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

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

With inflation not set to fall significantly in the foreseeable future, both input and output price indices for services have been near record highs. Input prices increased from 77.4 to 77.5.

Manufacturing PMI fell to 46.6 from 48.4, the lowest level since May 2020 and below all forecasts from the Reuters poll, which had predicted 47.8. An index reading that feeds into the composite PMI fell to 44.2 from 46.3.

There was no end in sight to the war, and optimism for the coming year continued to crumble among the factory purchasing managers. The Future Output Index fell to 44.8 from 45.3, the lowest level since May 2020, when the COVID-19 pandemic gripped the world.

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Reporting by Jonathan Cable; Adaptation by John Stonestreet

Our standards: The Thomson Reuters Trust Principles.

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