Eurozone 'stuck in a rut' as business activity contracts for second month

Business activity across the eurozone remained in the doldrums this month, with the composite purchasing managers' index (PMI) rising but remaining close to a seven-month low.

The flash reading of the HCOB/S&P Global October composite PMI was 49.7, up marginally from 49.6 in September and in line with consensus forecasts. This was the second straight month below the neutral 50-point level which separates growth from contraction.

"The eurozone is stuck in a bit of a rut," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

Growth in the eurozone's services sector slowed unexpectedly, with the PMI slipping to 51.2 from 51.4, missing the 51.6 estimate.

In contrast, the manufacturing PMI came in above forecasts at 45.9, up from 45 previously and ahead of the 45.1 estimate, but showed the economic contraction in the sector remained firmly entrenched below the neutral 50-point level.

De la Rubia said: “The eurozone’s service sector continues to grow, but only slightly, helping to keep the broader economy near stability. However, we shouldn’t expect too much in the near future. Companies in this sector are seeing fewer new orders, and the backlog of work has been shrinking for six months straight. For the first time since early-2021, service sector hiring has almost come to a halt."

The two largest economies in the eurozone, Germany and France, saw further marked reductions in business activity in October, but the rest of the region saw output increase at its fastest pace in four months.