Eurozone private sector growth slows to 4-month low

Rising energy costs and political and fiscal instability in France weighed on business activity

Private sector growth in the eurozone slowed in October to its weakest pace since June . According to S&P Global’s flash estimate , the Composite PMI Output Index fell to 51.9 from 53.1 in September . Economists polled by Reuters had forecast a decline to 52.7.

Rory Fennessy of Oxford Economics said that after a spring and summer in which the eurozone economy failed to meet expectations , the October figures dampen hopes that the situation could improve further . He stressed that the unstable situation in France has placed a heavy burden on the region , and that government borrowing costs have risen further as the fiscal situation has deteriorated .

Business activity in France unexpectedly contracted this month , as demand for goods and services weakened sharply . Companies surveyed attributed this to growing political uncertainty and economic pressures . In recent weeks , government borrowing costs have risen amid investor concerns about the country’s ability to repair its public finances . Street protests ahead of next spring’s presidential election have further heightened political tension .

Business confidence in France fell to its lowest level since 2012, excluding the pandemic period . The PMI figures point to an economic contraction .

Growth in the private sector also weakened in Germany , Europe’s largest economy .

The UK PMI, by contrast , showed resilience : companies recorded their strongest month of activity since February . However , according to official data , British consumers cut back spending last month as higher fuel prices strained household budgets . GfK reported that consumer confidence in October suffered its sharpest monthly drop since the start of the COVID-19 pandemic .

Input costs in the eurozone rose for a second consecutive month , driven by higher energy , fuel and transport costs , partly due to the war in the Middle East. However , companies raised their selling prices at a slower pace than in September , indicating that profit margins have been squeezed to some extent .

Harry Chambers of Capital Economics noted that while manufacturers continue to feel the impact of higher energy prices , there is still little evidence of second-round effects , which offers some relief to the European Central Bank (ECB).

According to a Reuters poll conducted earlier this month , the ECB will keep its deposit rate at 2.50% next week , but will raise it by 25 basis points in December , as inflation is roughly double the 2% target .

Business confidence in the eurozone fell to a five-month low , with optimism declining most sharply in manufacturing . New orders , a key indicator of demand , grew at the slowest pace of the current four-month expansion streak , with only marginal gains in both manufacturing and services . The services PMI fell to a two-month low , while the output index fell to a four-month low .

On the positive side , new export orders rose for a third consecutive month , a promising sign after nearly 4.5 years of uninterrupted monthly declines .

Hiring has almost stalled : employment barely rose after modest gains in the previous two months . Job creation in the services sector fell to a five-month low , while manufacturing employment declined after two months of growth .