Market news

23 October 2020

Eurozone PMI signals renewed economic downturn at start of fourth quarter

According to the report from IHS Markit, business activity fell back into decline across the eurozone in October as accelerating growth of manufacturing output was overwhelmed by a steepening deterioration in the service sector amid rising COVID-19 worries.

The rate of job losses eased, but forward -looking indicators deteriorated: inflows of new business showed a renewed decline and business optimism for the year ahead slipped to the lowest since May. Deflationary pressures meanwhile eased as business costs rose at a faster rate.

The flash Eurozone Composite PMI fell for a third consecutive month in October, dropping from to 50.4 in September to 49.4 to register the first contraction of business activity since June. Although the index remains well above the all-time lows seen during the height of the pandemic in the second quarter, the renewed decline raises the possibility that the region could see the economy contract again in the fourth quarter.

The survey also revealed increasingly divergent trends by sector. Manufacturing output growth accelerated to the fastest since February 2018, supported by inflows of new orders surging at the quickest rate since January 2018. Conversely, service sector output fell for a second successive month, deteriorating at the sharpest rate since May.

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