Mubasher: The euro area’s economic growth slowed in October from the previous month. The rate of expansion was seen as the “slowest” in more than two years, data released on Tuesday showed.
The October final reading was 53.1, exceeding a flash estimate of 52.7, but remained below September’s 54.1, IHS Markit said in its purchasing managers’ index (PMI) report, noting that the October data was the slowest since September 2016.
Both the services and manufacturing sectors saw weakening rates last month.
“Following on from September, manufacturing registered the weaker increase in output, posting its lowest growth in nearly four years. Despite remaining at a solid level, the service sector saw its slowest expansion since the start of 2017,” IHS Markit stated.
By country, Ireland registered the strongest rise, even though output gains were at their slowest level in seven months. France and Spain achieved better gains in activity “with growth in each case remaining above historical averages,” the report showed.
Germany’s growth, on the other hand, slumped to a five-month low “and the joint lowest in over two years,” while Italy’s activity dropped for the first time since the end of 2014.
The report attributed the downturn in overall activity growth in October to weaker gain from new business, which despite rising at a moderate pace was the slowest pace since September 2016.
“Eurozone companies reported a disappointing start to the fourth quarter. Business activity is growing at its slowest rate for over two years and expectations have slumped to the bleakest since the end of 2014,” commented IHS Markit chief business economist Chris Williamson.
In terms of prices, companies reported sharp rises in operating expenses, particularly due to higher energy and fuel prices, added to some increases in labour costs, particularly in Germany.
“An export-led slowdown, linked to growing trade tensions and tariffs, has been exacerbated by rising political uncertainty, growing risk aversion and tightening financial conditions. The slowdown has consequently become more broad-based to increasingly envelop the services economy,” Williamson added.
“While the PMI numbers hint at an upward revision to the 0.2% flash estimate of third quarter GDP growth, it’s clear that the economy has slowed and that the weakness has intensified into the fourth quarter,” the analyst concluded.
By 9:22 am GMT, the EUR/USD pair added 0.11% to $1.1420.
