low inflation has not shown activity in the euro area
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At the beginning of the fourth quarter, business activity in the euro area continued to decline. According to preliminary estimates from Hamburg Commercial Bank (HCOB) and S&P Global, the composite PMI index fell in October to a three-year low of 46.5 points from 47.2 points in September (see chart), although analysts expected the indicator to rise to 47.4 points . An indicator value above 50 points, we remind you, indicates an increase in business activity, below – a contraction.
The decline in business activity in the euro area continues to be caused by the ECB’s tight monetary policy (see Kommersant on September 15), as well as the general weakness of the world economy (see Kommersant on October 11). Experts interviewed by Bloomberg expect that the rise in energy prices due to the military conflict in the Middle East may also contribute to the contraction of activity in the coming months – the region, we recall, accounts for a third of world oil trade. The increase in oil prices, which was recorded after the Hamas attack on Israel, is so far called “limited” by the IEA and the US Department of Energy, but they remind of the increasing risks of supply disruptions.
The manufacturing PMI index fell to 43 points in October from 43.4 a month earlier. The indicator, notes S&P Global, was reflected in a significant reduction in the number of new orders. The decline in the services sector also accelerated in October: the business activity index amounted to the minimum in two and a half years, 47.8 points, after 48.7 in September. The ongoing contraction of activity in recent months in the sector, which previously demonstrated stability (see, for example, Kommersant on February 22), is explained by the exhaustion of the post-pandemic surge in travel spending.
It should be noted that the values of the leading indicators of S&P Global strengthened analysts’ confidence that at the next rate meeting, which will be held on Thursday, October 26, the ECB will leave it at the current level (4.5%). The latest data on rising prices in the euro area also indicate that the regulator’s decision will be exactly this. According to Eurostat, inflation in September amounted to 4.3% in annual terms (in August – 5.2%). This is the lowest figure since October 2021. Core inflation (excluding food and energy prices) continued to slow down last month – to 4.5% (5.3% in August).
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