LONDON (Reuters) – Euro zone business activity held steady last month, a small improvement from September’s modest decline, supported by an expansion in the bloc’s dominant services industry that offset an ongoing – but stabilising – decline in manufacturing.
HCOB’s composite Purchasing Managers’ Index for the currency union, compiled by S&P Global and seen as a good gauge of overall economic health, rose to 50.0 in October from September’s 49.6.
That was bang on the 50 mark separating growth from contraction and above a preliminary 49.7 estimate.
A PMI covering the service industry nudged up to 51.6 last month from 51.4, ahead of the 51.2 flash reading.
“‘Growth’ and ‘stability’ are not the first words you would associate with the current economic situation in the euro area,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
“But that is exactly what the services sector has been providing, with stable growth since early this year. The modest expansion of the services sector has been crucial in keeping the currency union out of recession.”
The economy is likely to expand 0.2% this quarter, according to a recent Reuters poll.
Demand for services waned last month, with the new business index for the bloc falling to 49.2 from 49.7, but de la Rubia said this could be temporary.
“We are confident that service providers will continue to increase their activity, as lower inflation and higher wages mean higher private consumption, which supports demand for services,” he added.
“Therefore we would also expect new business to recover.”
Services remained confident about the year ahead, albeit not as much as they were in September. The composite future output index dipped to 58.1 from 58.6 but was comfortably ahead of the 57.3 preliminary reading.
(Reporting by Jonathan Cable; Editing by Hugh Lawson)