Euro Zone Business Activity Steady in October

LONDON (Reuters) – Euro zone business activity held steady last month, showing a slight improvement from September's modest decline. This stability was supported by growth in the bloc's dominant services industry, which offset an ongoing but stabilizing decline in manufacturing.

The HCOB's composite Purchasing Managers' Index (PMI) for the currency union, compiled by S&P Global and regarded as a strong indicator of overall economic health, rose to 50.0 in October from September's 49.6. This reading is right at the threshold of 50 that separates growth from contraction and is above the preliminary estimate of 49.7.

A PMI specifically for the services industry increased to 51.6 last month from 51.4, surpassing the flash estimate of 51.2.

> "'Growth' and 'stability' are not the first words you would associate with the current economic situation in the euro area," stated Cyrus de la Rubia, chief economist at Hamburg Commercial Bank. "However, that is exactly what the services sector has been providing, maintaining stable growth since early this year. The moderate expansion of the services sector has been essential in keeping the currency union out of recession."

According to a recent Reuters poll, the economy is expected to expand by 0.2% this quarter.

Demand for services dwindled last month, with the new business index for the bloc decreasing to 49.2 from 49.7. However, de la Rubia noted that this could be temporary.

> "We are confident that service providers will continue to increase their activity, as lower inflation and higher wages should drive up private consumption, thus supporting demand for services," he mentioned. "We also expect new business to bounce back."

Despite decreased confidence from September, the services sector still showed optimism for the upcoming year. The composite future output index slightly dipped to 58.1 from 58.6, comfortably above the preliminary reading of 57.3.