Eurozone business growth hits two-year low, optimism lowest since 2014

LONDON (ICIS)–The eurozone economy grew at the slowest rate for more than two years in October on the back of an export-led slowdown that has now spread to the services sector, according to a flash composite purchasing managers’ index (PMI) from IHS Markit on Wednesday.

The flash eurozone composite PMI reading for October was 52.7, down from September’s reading of 54.1.

A reading above 50.0 indicates growth whereas a reading below that level signals a contraction.

The 25-month low composite PMI was driven by a 26-month low manufacturing PMI of 52.1 and a 24-month low services PMI of 53.3.

Growth moderated sharply in Germany, falling to the weakest level since May 2015, while in France business activity growth picked up slightly but was still the third-weakest rate seen since the beginning of 2017, IHS said.

Meanwhile, expectations for the year ahead were the joint-lowest since December 2014, with manufacturing optimism hitting a 70-month low.

“The pace of Eurozone economic growth slipped markedly in October, with the PMI setting the scene for a disappointing end to the year,” said IHS chief business economist Chris Williamson.

“The survey is indicative of GDP growth waning to 0.3% in the fourth quarter, and forward-looking indicators, such as measures of future expectations and new business inflows, suggest further momentum could be lost in coming months.”

Williamson said that the slowdown is being led by a drop in exports, which is linked to many of the survey respondents’ answers to questions about trade wars and tariffs that “appear to have darkened the global economic environment and led to increased risk aversion”.

“It is therefore not surprising to see the slowdown broadening out across the economy, hitting the service sector,” he added.

Final PMI data for October will be published on 2 November for manufacturing and 6 November for services and composite indicators.

Pictured: Container ship in Hamburg, Germany
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