Eurozone activity contracted in October for the fourth consecutive month, a slowdown that intensified in the fourth quarter and is occurring at the “fastest” pace since April 2013, with the exception of the lockdown period.
The S&P Global PMI (Purchasing Managers’ Index) ‘flash’ indicator, of which IHS Markit is a part, fell to 47.1 points in October, one point less than in September (48.1 points) and the lowest in 23 months and below the 50 points that separate growth from contraction.
S&P Global Chief Economist Chris Williamson insists that “the eurozone economy looks likely to contract in the fourth quarter” given the “increasing drop in global activity” and “the deterioration in demand seen in October” , reason why, in his opinion, “the recession seems more and more inevitable”.
The sector that fell the most was the manufacturing sector, which fell for five months and at a rate not seen since July 2012, and the services sector fell for the third consecutive month and contracted by a magnitude not seen since May 2013 (except during the lockdowns adopted to curb the pandemic).
The steepest declines were seen in the chemicals and plastics and basic resources subsectors, reflecting their high reliance on energy, while growth was limited to technology, industrial services, and pharmaceutical and biotech companies.
In the eurozone, the biggest drop was recorded in Germany, where the manufacturing and services sectors registered “sharp and accelerating rates of contraction”, while France saw its global activity stall, with a modest expansion of activity in the services sector. which made up for a sharp drop. in the manufacturing sector.
As for new orders for goods and services, these fell for the fourth consecutive month in October and the rate of decline accelerated to a rate not seen since December 2012 (if the months of confinement are not taken into account), which points to a growing slowdown in demand.
Faced with this situation and in order to maintain activity levels, the companies continued with the processing of the portfolio, which “fell for the fourth consecutive month” and especially in the industrial sector.
Employment recovered slightly in October, although it was the third lowest recorded in the last year and a half, reflecting cuts by some companies and a greater reluctance to hire, generated by uncertainty about the outlook.
Business activity expectations for the next 12 months remain weak, at the second lowest level since the first closings, with confidence “particularly low in the industrial sector and particularly in Germany”.
According to data from S&P Global, while improving goods supply problems have helped ease some inflationary pressures, rising energy costs and rising wage pressures have kept the overall rate of cost inflation extremely high.
Chris Williamson believes that “the rising cost of living remains the main driver of the economic slowdown”, but also the region’s energy crisis is “a major source of concern and a hindrance to business activity, especially in the energy sectors intensive”.
Source: TSF
