Euro Zone Growth Hits 29-Month High as Services Sector Surges
The euro zone economy expanded in October at its fastest pace since May 2023, signaling a clear break from the sluggish growth seen earlier this year. According to new data, service sector activity surged while overall demand conditions improved, boosting confidence across the region.
The HCOB Eurozone Composite Purchasing Managers’ Index (PMI), compiled by S&P Global, rose to 52.5 in October, up from 51.2 in September. This marks the tenth consecutive month of growth and the strongest reading in 29 months. Any PMI reading above 50.0 reflects expansion, showing that business activity continues to strengthen.
“Finally, there’s something positive to report about the euro zone economy again,” said Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank. “The services sector saw a solid upswing in October. You’d have to go back to May of last year to find such a strong rise in new business.”
Services Drive Expansion While Manufacturing Stalls
New business volumes grew at the fastest pace in two and a half years, powered entirely by the services sector, while manufacturing orders remained stagnant. The composite new orders index climbed to 52.1 from 50.6, underscoring rising demand for services across Europe.
Service providers pushed their activity index to 53.0, up from 51.3 in September, reaching a 17-month high.
Spain and Germany Lead Eurozone Recovery
Among major economies, Spain led the growth with a strong composite reading of 56.0, its best performance in ten months. Germany followed with a surprise rebound to 53.9, marking its highest level in over two years.
Italy and Ireland also recorded healthy expansions at 53.1 and 53.7, respectively. However, France remained the laggard, with its index slipping to 47.7, an eight-month low, indicating continued contraction.
“France is clearly putting the brakes on euro zone economic growth,” added de la Rubia. “But beyond France and Germany, the rest of the euro zone shows its strongest expansion in two and a half years.”
Hiring Rebounds and Price Trends Stabilize
Employment across the euro zone grew at the fastest rate in 16 months, reversing the small decline seen in September. Service firms increased hiring to meet higher demand, while manufacturers continued to cut jobs at a modest pace.
On the pricing side, input cost inflation eased to a three-month low, but selling prices rose at the fastest rate in seven months, suggesting companies are regaining pricing power as demand strengthens.
ECB Keeps Rates Steady as Inflation Nears Target
The European Central Bank (ECB) kept its key interest rate unchanged at 2% for the third consecutive meeting, maintaining that monetary policy is currently in a “good place.”
With inflation stabilizing around the ECB’s 2% target and business activity improving, analysts expect the central bank to pause further rate cuts for now. According to a Reuters poll, the euro zone economy continues to march steadily toward a more stable growth phase.
