Euro zone economic growth slows to four-month low in October, PMI shows

Euro Zone Growth Slows to Four-Month Low in October as PMI Weakens

Euro Zone Economic Performance and PMI Analysis

LONDON, Nov 4 (Reuters) - The euro zone's economic expansion slowed sharply but did remain resilient in October as demand — a key gauge of underlying momentum — came close to stalling while rising costs squeezed businesses and confidence hit its weakest level in five months, a survey showed on Wednesday.

PMI Data and Economic Growth Rate

The S&P Global Eurozone Composite PMI fell to 51.7 in October from September's 53.1, a four-month low, and under a preliminary estimate of 51.9.

Understanding the PMI Threshold

Readings above 50.0 indicate growth in activity.

Expert Commentary on Economic Expansion

"October's PMI survey data indicate that the euro zone economy is growing at a respectable though unexciting 0.3% rate at the start of the fourth quarter, building on the robust performance seen throughout the third quarter," said Chris Williamson, chief business economist at S&P Global Market Intelligence.

Demand, Orders, and Output Trends

New orders grew only marginally in October, a steep drop from three months of stronger growth, with demand for services edging lower. Overall export orders rose for a third consecutive month but also lost pace. Both manufacturing and services output expanded at slower rates, pointing to a broad-based cooling.

Employment and Sector Performance

Employment fell marginally. Services firms led the decline, partly negating a slight rise in factory headcounts.

Cost Pressures and Inflation

Cost pressures intensified with input price inflation climbing to a five-month high. Businesses raised their charges sharply, though slightly less aggressively than in September.

Energy Prices and Consumer Impact

"Further upward price pressures were reported in October, largely linked to higher energy prices, which are squeezing customers' budgets and discouraging spending," Williamson said.

Monetary Policy and Business Confidence

As expected the European Central Bank left interest rates on hold last week, but economists polled by Reuters last month said it would hike again in December.

Trends in Business Confidence

Business confidence weakened for a third straight month and remained below its long-run average.

Country-Specific Performance

France was the weakest performer, slipping back into contraction after a brief recovery in September. Germany, Italy, Spain and Ireland continued to grow, though all lost momentum.

Services Sector PMI

The euro zone services PMI, which feeds into the composite index, fell to 51.4 from 53.0 in September, also a four-month low.

Reporting and Editorial Credits

(Reporting by Jonathan Cable; Editing by Joe Bavier)