President Lagarde had already signaled a pause, and October PMIs underscored the weaknesses in the eurozone economy.
The European economy continues to weaken and the latest signs are among the most severe: October Purchasing Managers’ Indices (PMI) fell again across the manufacturing and services sectors, as well as in the single currency’s major economies, all pointing towards a recession at the end of this year. The ECB will have taken the data into account in its decision to keep interest rates unchanged, but the lack of news in the macro forecasts for this year and next has caught the market by surprise, especially as the risk of a new energy shock becomes clearer.
The initial Eurozone PMI reading was disappointing on several levels: on the one hand, market estimates were disappointing, with most sub-indices falling short of expectations; On the other hand, it shows a worsening of the recession the bloc will already be in, a scenario that seems impossible to avoid. The composite index fell from 47.2 in September to 46.5, when the market was indicating a marginal increase to 47.4. By sector, the industry index fell further, from 43.4 to 43.0, while the services index fell from 48.7 to 47.8.
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