Euro Zone Service Sector’s October Performance Better Than Initial Estimate; Job Creation Continues To Suffer

The final reading of the euro zone service sector purchasing managers’ index, or PMI, published by Markit on Wednesday, revised up the dismal performance recorded in a flash reading released on Oct. 24, but it was not enough to rescue the index's fall from a 27-month high recorded in September. However, the PMI managed to stay above the 50-point mark, which separates expansion from contraction, for the fourth consecutive month.

The euro zone service sector PMI in October was pegged at 51.6, up from a preliminary value of 50.9, but lower than September’s 52.2 reading. The bloc’s composite output PMI, based on surveys of both manufacturing and service sectors, reached 51.9, marginally higher than a flash reading of 51.5, but lower than September’s 52.2 reading.

“The euro area economic recovery lost less momentum than first estimated in October,” Chris Williamson, chief economist at Markit, said in a statement. “The survey signals a mere 0.2% quarterly growth rate at the start of the fourth quarter, unchanged on the third quarter.”

Germany's all-sector output showed signs of growth at a relatively faster clip, close to its seven-month peak in August, while in France, composite output held steady and just above the neutral 50-point mark.

Germany’s service-sector activity index was down to 52.9 in October, compared to 53.7 in September, but revised up from 52.3 in a preliminary reading. The country’s composite PMI was at 53.2, same as in September.

France’s service-sector activity was down to 50.9 in October, compared to 51.0 in September, but up from 50.2 recorded in a flash reading. The French composite output PMI was at 50.5, unchanged from September's number.

Ireland recorded the strongest performance by far among the nations surveyed, with its composite output PMI pegged at a 58.8 reading.

Despite an expansion, employment fell for the twenty-second consecutive month in October, barring Ireland, which reported strong job creation, and France, which saw a marginal increase in payroll numbers.

“The loss of momentum raises concerns that the upturn is faltering and piles further pressure on the European Central Bank to reinvigorate the recovery, especially as a drop in inflation to a near four-year low of 0.7% – well below the ECB’s target rate of 2.0% – has raised concerns about deflation taking hold,” Williamson said.