Eurozone manufacturing sector in recession

The drop in euro zone manufacturing activity in October was steeper than estimated, indicating the sector is in recession as the cost-of-living crisis took a toll on demand, a survey showed yesterday.

S&P Global’s final manufacturing Purchasing Managers’ Index (PMI) fell to a 29-month low at 46.4 in October from 48.4 in September, down from a preliminary reading of 46.6 and further below the 50 mark that separates growth from contraction.

“The euro zone goods-producing sector experienced a deeper decline at the start of the fourth quarter. The PMI surveys clearly indicate that the manufacturing economy is in a recession,” said Joe Hayes, senior economist at S&P Global Market Intelligence.

“In October, new orders fell at a rate we have rarely seen during 25 years of data collection: only during the worst months of the pandemic and at the height of the global financial crisis, between 2008 and 2009, the declines have been stronger,” explained Hayes.

The new orders index fell to 37.9 points last month, from 41.3 in September, despite a slight easing of still elevated inflationary pressures.

Inflation in the bloc spiked higher than expected last month, official data showed on Monday, fueling expectations that the European Central Bank will continue to raise interest rates despite slowing economic growth.

Concerned that rapid price growth is taking hold, the ECB is raising borrowing costs.