ALBAWABA – The Eurozone economy took a surprising turn for the worse in October as demand fell across the region, with HCOB's flash Eurozone PMI falling to its lowest since November 2020, news agencies reported.
The Eurozone Composite Purchasing Managers' Index (PMI), compiled by S&P Global, fell to 46.5 in October from September's 47.2, Reuters reported.
Outside of the COVID-19 pandemic months, this is the lowest PMI reading since March 2013.
Seen as a reliable guide to overall economic health, the PMI slipping further below the 50.0 threshold indicates the Eurozone economy may be slipping into recession.
The euro swung to a loss against the US dollar, falling as much as 0.1 percent to $1.0655 and snapping a three-day rising streak, Bloomberg reported.
Bonds held onto earlier gains, sending the 10-year German yield as much as 8 basis points lower to 2.79 percent, as bund yields are trading around 20 basis points off a peak touched earlier this month.
Eurozone Banks tightened credit standards further in the three months through September due to higher interest rates, the European Central Bank (ECB) said Tuesday in its quarterly Bank Lending Survey. In addition to the worsening economic backdrop.
In Germany, the flash PMI indicates a recession is well underway in Europe's largest economy, with business activity contracting for the fourth straight month. The downturn in manufacturing was also matched by a renewed decline in services, Germany’s PMI showed, according to Reuters.
On the demand side, German consumer sentiment is set to fall for a third month in a row in November, ending any hopes of a recovery this year as households grapple in particular with high food prices, another survey showed on Tuesday.
The Eurozone PMI has hit its lowest levels in years - Shutterstock
In the Eurozone's second-largest economy, France, activity saw another solid fall in October, PMI data showed. Even though the rate of contraction was less than September’s, it was still the second-steepest decline in close to three years, S&P Global said.
The PMI covering the Eurozone’s dominant services industry sank to a 32-month low of 47.8 from 48.7, below all forecasts in the Reuters poll which had predicted no change from September.
Demand for services has fallen again this month and at a sharper rate than in September. The new business index dropped to 45.5 from 46.4, its lowest since the start of 2021.
The manufacturing PMI fell to 43.0 from 43.4, marking its 16th month below 50, whereas the Reuters poll had predicted 43.7.
Meanwhile, an index measuring output held steady at 43.1.
Tuesday's purchasing managers' survey will likely make disappointing reading for the European Central Bank, which meets on Thursday, to discuss further policy measures.
Optimism about the coming 12 months among factory managers waned, Reuters reported, with the future output index dropping to 50.3 from 51.6, marking its lowest reading this year.
In Britain, outside of the European Union, businesses reported another decline in activity this month, underlining the risk of recession ahead of the Bank of England's interest rate decision next week.
Reuters’ analysts expect the 20-country Eurozone to narrowly dodge a recession, but the economy was expected to have only flatlined last quarter and will do the same again in the current one.
