Eurozone’s economic activity showed mixed signals in October, with PMI Manufacturing rising slightly from 45.0 to 45.9, while PMI Services fell marginally from 51.4 to 51.2. As a result, Composite PMI ticked up slightly to 49.7 from 49.6, but remained below the 50-point mark, indicating ongoing economic contraction.
Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, described the Eurozone as “stuck in a bit of a rut,” noting that the economy contracted for the second consecutive month. While the manufacturing sector continues to slump, its negative impact is being balanced out by minor gains in services. De la Rubia added, “For now, it is not clear whether we will see a further deterioration or an improvement in the near future.”
According to de la Rubia, for ECB, the data present an “unwelcome surprise,” particularly in the services sector. Inflationary pressures appear to be lingering, driven by wage growth, which has been pushing up costs and selling prices for service providers.
This persistent inflation suggests that the ECB may lean towards a 25bps rate cut in December, as opposed to the larger 50bps cut some had speculated.
