Eurozone economy at risk of contracting in fourth-quarter

Eurozone business activity expanded slightly faster than expected last month but remained close to stagnation, according to a survey whose forward-looking indicators suggest what little growth there is could dissipate.

Wednesday’s downbeat survey of private sector businesses comes soon after the European Central Bank reignited its 2.6 trillion euro bond-buying program to try and stimulate inflation and growth.

IHS Markit’s final eurozone composite Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, rose to 50.6 from September’s more than six-year low of 50.1 and above a preliminary estimate of 50.2.

However, the index remained near the 50 marks separating growth from contraction.

“The euro area remained close to stagnation in October, with falling order books suggesting that risks are currently tilted towards a contraction in the fourth quarter,” said Chris Williamson, a chief business economist at IHS Markit.

An index measuring new business was 49.6, above September’s 48.7 but the second consecutive month it has been below 50. Some of the meager activity was generated by firms eating into previously-placed work — as they have done for almost all of this year.

Williamson said the headline PMI was currently consistent with quarterly GDP rising 0.1%. A Reuters poll last month had pegged growth this quarter at 0.2%.

Activity in the bloc’s dominant services industry also accelerated but remained lackluster. Its PMI nudged up to 52.2 from 51.6 in September.

Demonstrating the gloomy mood among purchasing managers, the services business expectations index fell to 57.4 from 58.6. It has been lower only once in five years, in August.

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