Eurozone services sector grows less than expected in October

Activity in the eurozone services sector grew less than expected in October, although output in the manufacturing sector reached a 30-month high, according to data released on Friday.

Markit’s final eurozone composite purchasing managers’ index, which combines manufacturing and services, came in at 53.3, marginally lower than the flash release of 53.7 but up from the previous month’s 52.6.

Economic growth was led by an upswing in the rate of expansion in Germany with output rising at the second fastest pace in the year to date. France, Italy, Spain and Ireland also reported increases in economic activity but only Spain saw its rate of expansion improve since September.

Incoming new orders accelerated to a six-month high during the month, contributing to the steepest accumulation of backlogs of work for almost five-and-a-half years. The combination of firmer demand and stretched capacity is likely to lead to further growth of output and employment in the coming months.

Meanwhile, Markit’s final services PMI for the euro bloc rose for the thirty-ninth successive month to 52.8 from 52.2 in September, but was lower than the initial estimate of 53.5.

All nations reported growth in services with marked increases in Germany, Spain and Ireland. Only Germany and Italy saw the rate of expansion improve over the month.

Services also got a boost from increased demand and limited capacity, with new business inflows rising at the quickest pace for three months. As a result, employment pushed higher than the previous month.

Chris Williamson, chief business economist at IHS Markit, said: “The weaker than previously indicated expansion in October raises doubts about whether the eurozone is breaking out of the sluggish growth phase seen throughout much of this year.

“However, with backlogs of work rising at the fastest rate for over five years, hiring showing tentative signs of accelerating and business confidence improving, there’s a strong suggestion that growth will pick up as we move closer towards the end of the year.”