Eurozone PMI Services for October was finalized at 51.6, up from September’s 51.4. PMI Composite also moved to 50.0 from 49.6, indicating stagnation rather than expansion across the region. The services sector continues to play a vital role in keeping Eurozone’s economy afloat, yet concerns of a Q4 contraction remain.
Spain topped the Eurozone with PMI Composite of 55.2, while Ireland followed at 52.. Italy’s index reached 51.0, a four-month high. Meanwhile, Germany’s reading improved to 48.6, still in contraction but at a three-month high. France recorded an eight-month low of 48.1.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, remarked, “The modest expansion of the services sector has been crucial in keeping the currency union out of recession.” He highlighted that declining inflation and higher wages are likely bolstering consumer spending, which sustains demand in services. However, de la Rubia pointed out that their GDP Nowcast for Q4 indicates a “slight contraction” in overall Eurozone output.
De la Rubia also noted that structural issues, such as labor shortages which exert upward wage pressures, continue to keep inflation elevated. “The ECB will find it “difficult, if not impossible”, to achieve the 2% inflation target in a sustainable manner in this environment,” he added.
