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| Source: Markit Economics
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Eurozone preliminary PMI (Purchasing Managers' Index) data for October shows that the 16-country region's manufacturing and service output in October, grew at the fastest pace since December 2007.
The Markit Flash Eurozone Composite Output Index, based on around 85% of normal monthly survey replies, was published this morning and shows that the index rose from 51.1 in September to 53.0 in October, registering an increase in private sector output for the third successive month.
Manufacturing output increased for the third month running, with the rate of growth accelerating to the fastest since November 2007. Service sector activity meanwhile rose for the second month, expanding at the sharpest rate since February of last year, though the rate of increase remained modest and continued to trail that of manufacturing.
New orders rose for the second month running, growing modestly but nonetheless at the fastest pace since November 2007. Growth was driven primarily by manufacturing, where new orders showed the strongest gain since August 2007. Despite the recent strength of the euro, new export orders showed the largest rise since January 2008, but the rate of growth remained very subdued. Higher levels of new business were reported for the second month running in services, with growth hitting a 20-month high but remaining lacklustre.
Employment fell for the sixteenth successive month. The rate of job losses eased compared to September. The rate of decline is much slower than that seen in the spring but remains high by historical standards of the survey. Both manufacturing and services saw reduced rates of job losses, though the former continued to see the sharper rate of job shedding, despite seeing the smallest cut in headcounts for a year.
Backlogs of work fell for the nineteenth month, indicating that spare capacity persists and headcounts are likely to fall further in the near future. However, the decline was the smallest for 17 months, suggesting the rate of job losses should ease.
Confidence in the service sector about the year ahead remained buoyant, though dipped slightly on that seen in the previous two months. Meanwhile, the ratio of manufacturing new orders to finished goods inventories hit a near 10-year high. This suggests output will need to continue rising in coming months to meet the shortfall of stock compared to sales.
Manufacturers raised their purchasing for the first time since May of last year, which put more pressure on suppliers, whose delivery times consequently exhibited the greatest lengthening since March of last year. Delivery delays and rising commodity prices were both seen as drivers of the first rise in manufacturers’ input prices for a year. With service sector input costs falling only marginally during the month, overall average input costs across both manufacturing and services were unchanged, contrasting with falling costs over the previous 11 months.
Prices charged continued to fall at a steep pace as companies were again pressurised into offering discounts to stimulate sales of goods and services in the face of weak underlying demand. The fall in charges was the slowest for 10 months, however, moderating in both manufacturing and services.
Commenting on the flash PMI data, Chris Williamson, Chief Economist at Markit said: “The flash PMIs indicate that the Eurozone economy has entered Q4 on a strong note, with growth accelerating in both manufacturing and services. The data are consistent with GDP rising at a quarterly rate of around 0.4% in October. Reassuringly, job losses also slowed, and forward-looking indicators such as service sector confidence and manufacturing order-to-inventory ratios suggest that the labour market could stabilise early next year.”
The Eurozone PMI (Purchasing Managers' Index) is produced by Markit Economics and is based on original survey data collected from a representative panel of around 4500 companies based in the euro area manufacturing and service sectors. The flash estimate is typically based on approximately 85-90% of total PMI survey responses each month and is designed to provide an accurate advance indication of the final PMI data.
