HomeBusinessThe eurozone economy started the fourth quarter on the back foot, fueling...

The eurozone economy started the fourth quarter on the back foot, fueling fears of a recession (PMI).

LONDON (Reuters) – The decline in business activity in the euro zone accelerated last month as demand in the dominant services sector weakened further, a survey showed on Monday, suggesting a growing risk of a recession in the 20-year currency union to land.

The economy contracted 0.1% last quarter, official data showed, and Monday’s latest Composite Purchasing Managers’ Index (PMI) for October showed the bloc started this quarter on the back foot.

HCOB’s PMI, compiled by S&P Global and seen as a good indicator of overall economic health, fell to 46.5 in October from 47.2 in September, the lowest since November 2020, when COVID-19 restrictions were imposed much of the continent were tightened.

That was below the 50 mark separating growth and contraction for the fifth month in a row and was in line with a preliminary estimate.

The services PMI fell from 48.7 to 47.8, also in line with the flash estimate.

“It appears that the eurozone services sector is limping out of the gate this last quarter. With new output falling sharply, this does not paint a rosy picture for what lies ahead,” said Cyrus de la Rubia, chief economist at Handelsbank Hamburg.

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“Eurozone GDP could decline in the fourth quarter,” he added. France was the bloc’s worst-performing major economy, with Germany and Italy close behind.

Industrial activity took a further step back in October, a sister survey showed last week, which showed new orders contracted at one of the highest rates since data was first collected in 1997.

The picture was similar for the services sector and the new business index, a measure of demand, was the lowest since the start of 2021 at 45.6, down from 46.4, as indebted consumers feeling the pressure of price rises and higher borrowing costs kept their hands in their pockets.

Last month, the European Central Bank left interest rates unchanged at record highs, ending an unprecedented run of ten consecutive rate hikes, but stressed that growing market talk of rate cuts was premature.

Policymakers there, who have failed to get inflation on track, are likely to take some relief from the easing price pressures shown in the PMI survey, as both input and output price indexes have fallen from their September readings .

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The composite output price index fell from 52.2 to 52.0, the lowest level since the beginning of 2021.

(Reporting by Jonathan Cable; Editing by Hugh Lawson)

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