The eurozone Purchasing Managers’ Index (PMI) increased slightly to 49.7 in October, reflecting ongoing economic contraction. The industrial PMI exceeded expectations at 45.9, while the services PMI fell short at 51.2. Chief economist Cyrus de la Rubia noted stagnation in the eurozone, with France deteriorating and Germany easing slightly. The European Central Bank faces unwelcome surprises with these figures.
Germany’s PMI improved to 48.4, indicating contraction but showing signs of better-than-expected results in the fourth quarter. However, structural weaknesses may impact GDP growth. In the UK, the composite PMI dropped to 51.7, the lowest in eleven months, with declining industrial and service PMIs.
Despite challenges, there are glimpses of progress within specific sectors. Wages pressure suggests high inflation in services, calling for caution in interest rate cuts. Expectations lean towards a smaller rate reduction in December. While uncertainties linger, the possibility of a more aggressive stance on interest rate cuts remains if the economic downturn deepens.