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Business growth slowest for over two years in eurozone

Staff Writer |
Flash PMI survey data indicated that the eurozone economy grew at the slowest rate for over two years in October as an export-led slowdown continued to broaden-out to the service sector.

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In a sign that the slowdown has further to run, companies’ expectations of future growth slipped to the lowest for nearly four years, with a near six-year low seen in manufacturing.

Reduced optimism further dented hiring, hitting jobs growth.

Price pressures meanwhile remained elevated, close to seven-year highs.

The IHS Markit Eurozone Composite PMI fell to 52.7 in October, down from 54.1 in September and reaching its lowest since September 2016, according to the flash reading (which is based on approximately 85% of usual monthly replies).

Manufacturing led the slowdown, with factory output rising only modestly to register the weakest monthly production gain since December 2014.

However, service sector activity growth also slowed, easing to a two-year low, in a sign of the slowdown broadening out beyond the goods-producing sector.

The weakened rate of expansion was accompanied by a further deterioration in expectations for future growth to the lowest since November 2014.

Optimism sank especially in manufacturing, down to the lowest since December 2012, but also dropped markedly in the service sector, where expectations for the year ahead were the jointlowest since December 2014.

Growth of new orders meanwhile eased to the slowest since August 2016, weakened by manufacturing orders falling (albeit only marginally) for the first time since November 2014.

New export orders for goods decreased for the first time since June 2013.

However, October also saw the secondsmallest rise in service sector new business for almost two years.

Backlogs of work rose at a marginally faster rate than in September but still showed the secondsmallest rise since January 2017.

Factories reported the second successive monthly fall in backlogs (the first such back-to-back monthly decline since early-2015), contrasting with a slightly increased rate of backlog accumulation in the service sector.

Employment continued to rise, but the rate of jobs growth was the second-lowest for just over a year, easing to a 22-month low in manufacturing and three-month low in services.

Price pressures meanwhile remained close to a seven-year high.

Input price inflation edged up to a four-month high, registering the third-largest monthly rise in costs since May 2011.

A steeper rate of increase in manufacturing costs was in part offset by a small moderation in service sector input cost inflation, albeit with both sectors continuing to see elevated levels of price pressures.

Output price inflation edged slightly lower but also remained among the highest seen over the past seven years.

While factory gate prices showed the smallest increase for 14 months, service sector charges once again rose at one of the strongest rates seen since the global financial crisis.

Other indices added to the softer picture: the amount of inputs bought by manufacturers barely rose, registering the smallest increase in three-anda-half years.

This reduced growth of demand for inputs in turn took some pressure off suppliers, meaning delivery times lengthened to the smallest extent since February of last year.

Within the eurozone, growth moderated especially sharply in Germany, sliding to the weakest since May 2015.

The smallest gain in factory output for almost four years was accompanied by the slowest service sector growth since May.

Notably, goods exports fell at the steepest rate since June 2013, down for a second consecutive month.

Future expectations also sank to the lowest since late2014, waning to a near six-year low in manufacturing and a three-year low in services.

Business activity growth picked up slightly in France but was nevertheless still the third-weakest seen since the start of last year.

Although service sector activity grew at the fastest rate for four months, manufacturing output fell for the first time in 27 months, led down by an increased rate of loss of export sales.

Business confidence fell in both sectors, down overall to the lowest for almost two years and dropping especially sharply in the goodsproducing sector.

Growth slowed across the rest of the singlecurrency area to the weakest since November 2013, dropping in both sectors but slipping most prominently in the service sector.

Future expectations meanwhile fell outside of France and Germany to the lowest since August 2013. â– 

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