London, Oct. 24 (BNA): Euro zone business activity took a surprise turn for the worse this month as demand fell in a broad-based downturn across the region, a survey showed, entering the fourth quarter on the wrong foot and suggesting the bloc may slip into recession.
Tuesday’s purchasing managers’ survey will likely make disappointing reading for the European Central Bank, which meets on Thursday, and market pricing now suggests ECB President Christine Lagarde’s ‘higher-for-longer’ interest rate narrative may not last as some expect.
HCOB’s flash euro zone Composite Purchasing Managers’ Index (PMI), compiled by S&P Global and seen as a good guide to overall economic health, fell to 46.5 in October from September’s 47.2 and its lowest since November 2020, Reuters reported.
Outside of the COVID-19 pandemic months it was the lowest reading since March 2013.
It was well below the 50 level that marks growth in activity and confounded expectations in a Reuters poll for an uptick to 47.4.
“The flash PMIs mark a poor start to October for the euro zone, especially after showing some early signs of recovery in September,” said Rory Fennessy at Oxford Economics.
“If this trend continues, this poses downside risks to our stagnant growth forecast for Q4.”
Suggesting a recession is well underway in Germany, Europe’s largest economy, business activity contracted there for a fourth straight month as the downturn in manufacturing was matched by a renewed decline in services, its PMI showed.
Meanwhile, German consumer sentiment is set to fall for a third month in a row in November, ending any hopes of a recovery this year as households grapple in particular with high food prices, another survey showed on Tuesday.
Business activity across France, the euro zone’s second largest economy, saw another solid reduction in October, PMI data showed. While the contraction softened from September, it was still the second-steepest decline in close to three years, S&P Global said.
In Britain, outside the European Union, businesses reported another decline in activity this month, underlining the risk of recession ahead of the Bank of England’s interest rate decision next week.
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