Commenting on the Eurozone PMI® survey data, produced for The Royal Bank of Scotland by NTC Economics, RBS Head of Financial Markets Economics & Rates Research, Dr Kevin Gaynor said:
“Eurozone service sector growth picked up again in October, driven higher by a further increase in the rate of growth of incoming new business. Particularly welcome is the news that firms continued to take on more staff -- despite seeing their input costs rise at the fastest pace for a year -- as growing business optimism prompted more companies to boost operating capacity. The further growth of backlogs of work, meanwhile, points to the development of capacity constraints, and suggests employment will continue to rise in coming months. The French and Spanish increases in selling prices hint at improving pricing power, no doubt related to their faster employment growth. This is direct evidence of “second round” inflation and should contribute to keeping the ECB on inflation alert.”
|Source: NTC Research|
Key findings for October:
The seasonally adjusted RBS/NTC Eurozone Service Sector Business Activity Index rose from 54.7 in September to 54.9 in October, signalling a modest improvement in the rate of growth to the fastest for 15 months. Business activity has now risen for 28 consecutive months.
All of the big-four euro member countries recorded an increase in business activity. The rate of growth accelerated in France and Italy, hitting four and eleven-month highs respectively, but slowed to two-month lows in both Germany (from the five-year high seen in September) and Spain. France consequently overtook Germany in reporting the strongest growth rate. The weakest growth of the big-four was seen in Spain, followed by Italy.
Incoming new business rose for the twenty-seventh straight month in October, with the rate of increase accelerating for the second month running to reach the fastest since July of last year.
Employment increased for the fifteenth successive month. The rate of job creation was unchanged from the four-year high seen in September, but nevertheless remained only modest as employment growth in France and Spain was offset by weak trends in Germany and Italy.
Backlogs of work grew for the second month running in October, rising at the fastest pace for 20 months. Trends varied markedly by country, ranging from a strong rise in France to falling levels in Germany and Italy.
Input cost inflation edged higher for the fourth consecutive month, reaching a 12-month high.
The rate of increase was again pushed up predominantly by the feeding through of higher oil and other energy prices.
Average prices charged rose for the second successive month, having fallen over the previous five months. The rate of increase picked up to a seven-month peak, but remained only weak.
Rising charges in France and Spain were offset by falling charges in Germany and Italy.