In October, eurozone private sector index slowed for a third consecutive month due to persistent difficulties with business supply.
The composite purchasing managers’ index is an average for eurozone manufacturing and services. A first estimate published on Friday shows that this index, based on company surveys, has dropped to 54.3 from 56.2 in September and 59 in August. Generally, a figure higher than 50 indicates increasing activity, while a figure lower than 50 indicates contraction.
Growth has been weakest for six months. In some respects, the slowdown is due to the extraordinarily high growth level in July, which called for a correction.
IHS Markit, an information provider with headquarters in London, said activity is still suffering from intensifying supply problems. “Concerns about the Covid-19 pandemic still play a big role in the disruption”, the agency further notes.
As a result of a shortage of industry raw materials and components, which are the consequence of transportation disruptions, business costs are rising at their fastest pace in 21 years.
The automotive industry, one of the most impacted sector, saw its production decline accelerate in October.
In the private sector, record cost increases reflected largely on sales prices. Reports showed “unprecedented increases” both in manufacturing and service industries.
As a result, consumer prices will continue to rise “in the coming months,” says Chris Williamson, economist at IHS Markit.
Moreover, “the recovery that began in the services sector during the summer has lost its momentum,”. “The resurgence of the virus, particularly in Germany, is causing new worries,” affecting the tourism and leisure sector, he warns.
As Mr. Williamson concludes, “after the strong growth observed in the second and third quarters, the trend is toward a much weaker GDP growth in the fourth and final quarters of the year in the euro zone.”