A new report by S&P Global released Monday showed the Eurozone economy contracted at the fastest pace in almost three years in October, as demand across the bloc deteriorated.
There was a decline in the purchasing managers index (PMI), which measures business activity, as the reading fell from 47.2 in September to 46.5 in October, indicating output is experiencing a significant and accelerating contraction. The report noted that the reading has now come in below the threshold of 50, which separates expansion from contraction, for five consecutive months.
The S&P also noted that as a 32-month job creation streak ended, it added to the “darkened economic outlook.”
The report said, “October’s sharper downturn in activity reflected a worsening performance by service providers, as the decrease in factory production levels remained on par with that seen in September. Still, the latest survey data signaled the third month in succession in which output has fallen in both monitored sectors.”
The report noted that the contractions in output were broad-based, being present throughout the Eurozone, with the sole exception of Spain, where the private sector activity remained flat for October. Ireland saw its first contraction in output in 11 months, as Germany and France continued sharp contractions, and Italy saw its fastest decline since last year.
If you were to ignore the pandemic-era months, the decline in new business was the most sudden decline since the Eurozone was mired in the sovereign debt crisis, in September 2012.
Cyrus de la Rubia, chief economist at Hamburg Commercial Bank said, “It looks like the service sector in the Eurozone is stumbling out of the gates for this final quarter. October marks the third straight month of business activity taking a hit. With new business diving steeply, it is not painting a rosy picture for what is ahead.”
Economists are now warning that the fourth quarter of 2023 could see economic output decline once more in the Eurozone, which would place the bloc within a technical recession.
