Eurozone Business Growth Slows More Than Expected in October, PMI Shows

The preliminary Eurozone Composite PMI, which measures activity across both the manufacturing and services sectors, slowed more sharply than expected in October, falling to 51.9 from 53.1 in September and missing market forecasts of 52.7.

The slowdown in private sector activity was largely driven by rising cost pressures linked to higher energy prices. Escalating geopolitical tensions in the Middle East and ongoing uncertainty surrounding Ukraine have increased concerns over energy supply costs, while worsening financial and political conditions in France weighed heavily on business sentiment and contributed to a contraction in French private sector activity.

Adding to concerns, separate data indicated that business growth also lost momentum in Germany, the Eurozone’s largest economy, suggesting that weakness is becoming increasingly broad-based across the region.

Recent economic reports pointed to a second consecutive monthly increase in input costs, driven primarily by higher energy, fuel, and transportation expenses. While companies continued to pass part of these costs on to customers, the pace of price increases slowed compared with September, helping to partially offset the impact of rising expenses.

Business confidence across the Eurozone declined to its lowest level in five months, with manufacturing firms reporting the sharpest deterioration in sentiment as demand conditions remained challenging.

Additional surveys showed that new orders, a key indicator of future demand, expanded at their slowest pace in four months. However, a third consecutive increase in new export orders following a prolonged period of weakness provided a modest positive signal and suggested that external demand may be showing early signs of improvement.

Despite the softer economic data, economists remain cautiously optimistic that the secondary effects of higher oil prices on growth and inflation will remain manageable, limiting the risk of a more pronounced slowdown in the months ahead.