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EUROZONE DATA: Germany and France Drag On EZ October Flash PMI

EUROZONE DATA
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The Eurozone October flash composite PMI was in line with consensus at 49.7 (vs 49.6 prior), though weakness was once again centred in Germany and France. From the report: “The rest of the eurozone actually saw output increase at the fastest pace in four months”.

  • However, aggregate activity remains weak, and shows little sign of re-acceleration. This supports the recent dovish repricing in ECB rate cut expectations (ECB-dated OIS price a 40% implied probability of a 50bp cut in December, up from ~20% last week).
  • Manufacturing activity remains “in a sustained downturn”, while services was still in expansionary territory.
  • However, “the drop in services new orders was the steepest for nine months” and “the service sector saw a near-stagnation of employment”.
  • The inflationary signals in the report also support further easing: “Output prices rose at a modest pace that was the slowest since February 2021, as a rise in services charges just outweighed a fall in manufacturing selling prices”.
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The Eurozone October flash composite PMI was in line with consensus at 49.7 (vs 49.6 prior), though weakness was once again centred in Germany and France. From the report: “The rest of the eurozone actually saw output increase at the fastest pace in four months”.

  • However, aggregate activity remains weak, and shows little sign of re-acceleration. This supports the recent dovish repricing in ECB rate cut expectations (ECB-dated OIS price a 40% implied probability of a 50bp cut in December, up from ~20% last week).
  • Manufacturing activity remains “in a sustained downturn”, while services was still in expansionary territory.
  • However, “the drop in services new orders was the steepest for nine months” and “the service sector saw a near-stagnation of employment”.
  • The inflationary signals in the report also support further easing: “Output prices rose at a modest pace that was the slowest since February 2021, as a rise in services charges just outweighed a fall in manufacturing selling prices”.