Eurozone Business Growth Slows to Four-Month Low Amid Rising Energy Costs and French Uncertainty

London: Rising energy costs and political and economic uncertainty in France are weighing on the eurozone’s private sector, with business growth slowing to a four-month low in October.

S&P Global’s preliminary composite Purchasing Managers’ Index (PMI), which tracks activity across the manufacturing and services sectors, fell to 51.9 in October from 53.1 in September. The reading was also below economists’ expectations of 52.7.

Although the index remains above the 50-point threshold that separates expansion from contraction, the decline points to a loss of momentum in the eurozone economy and raises concerns about the pace of future growth.

Business confidence weakens in France

Private-sector activity in France contracted again as demand for goods and services weakened. Concerns over government finances, elevated borrowing costs and political uncertainty have further undermined business confidence.

Excluding the Covid-19 pandemic period, French business confidence has fallen to its lowest level since 2012. Growth has also slowed in Germany, the eurozone’s largest economy, adding to concerns about the region’s overall economic performance.

Rising energy costs squeeze profit margins

Higher energy, fuel and transport costs linked to the conflict in the Middle East are putting additional pressure on businesses.

The rate of increase in operating costs accelerated for a second consecutive month. However, selling prices rose more slowly than they did in September, suggesting that companies are finding it increasingly difficult to pass higher costs on to customers and protect their profit margins.

Recruitment nearly stalls

Hiring across the eurozone has almost come to a standstill, reflecting weaker business conditions and growing uncertainty.

Employment growth in the services sector slowed to a five-month low, while manufacturing employment edged down following two months of improvement.

Despite the broader slowdown, new export orders increased for a third consecutive month. The improvement offers a positive signal for businesses after nearly four and a half years of declining export demand.

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