Eurozone private sector rise picks up to near two-and-a-half year high

The eurozone private sector saw its sharpest expansion in almost two-and-a-half years this month, a preliminary survey reading showed Friday.

Service sector growth spiked to a more than one-year high, while the manufacturing sector moved out of negative territory.

The Hamburg Commercial Bank's flash composite purchasing managers' index reading rose to 52.2 points in October from 51.2 in September. Climbing further above the 50-point neutral mark, the reading hit a 17-month high.

The composite PMI is calculated using a weighted average of the services and manufacturing readings. The flash services PMI rose to 52.6 points in October, a 14-month high, from 51.3 in September. The manufacturing PMI hit a two-month high of 50 points, the neutral mark, from 49.8 in September.

Survey publishers S&P Global said the flash data showed "the strongest increase in new orders for two-and-a-half years".

"Meanwhile, employment returned to growth as levels of backlogged work stabilised. The rate of input cost inflation eased and was weaker than the series average, but prices charged were raised at the sharpest pace in seven months. Companies remained optimistic that output will rise over the coming year, but sentiment waned at the start of the final quarter of the year," S&P Global said.

"A solid increase in output was registered in Germany, where the pace of growth hit a 29-month high. Similarly, the euro area excluding Germany and France posted the fastest rise in activity for two-and a-half years. Bucking the wider trend, France posted a fourteenth consecutive monthly reduction in output, and one that was the sharpest since February."

The Germany flash composite PMI output index improved to a 29-month-high of 53.8 points in October from 52.0 in September. However, the France flash composite PMI declined to 46.8 points from the 48.1-point final reading in September.

There was a steeper rise in new orders in the eurozone this month. S&P Global noted new business hit the loftiest level since April 2023.

S&P Global said: "The overall expansion was led by the services sector, but manufacturing new orders broadly stabilised following a fall in September. While overall new orders increased at a faster pace at the start of the final quarter, new business from abroad continued to decrease. New export orders (which include intra-eurozone trade) declined only slightly, however, and at one of the slowest rates since the current sequence of contraction began in March 2022."

Business confidence, however, weakened to a five-month low and below the series average, S&P Global noted.

"Weaker optimism in the 12-month outlook for output was signalled across both the manufacturing and services categories. Sentiment was relatively muted in Germany and France, but firms in the rest of the eurozone remained strongly confident that output will rise over the coming year," the survey publisher said.

The flash reading is calculated using 85% of survey responses. The composite PMI survey panel features around 5,000 firms. The final reading for the manufacturing sector is released on November 3, before the services and composite data on November 5.