Eurozone growth slows to four-month low as France's private sector contracts

Eurozone growth loses pace

The flash composite purchasing managers' index for the eurozone, published by S&P Global on 23 October, fell to 51.9 points from 53.1 in September. The reading is still above the 50-point line that separates expansion from contraction, but it is the lowest in four months. Services slipped to 51.7 from 53 points, a two-month low, while manufacturing eased to 52.4 from 52.9, its weakest reading in three months. New orders rose at the slowest pace in four months, and employment was broadly unchanged as services hiring slowed to a five-month low and factories cut jobs after two months of gains. Chris Williamson, chief business economist at S&P Global Market Intelligence, said the preliminary figure matches quarterly GDP growth of 0.3% in the eurozone, while pointing to renewed inflation pressure and higher interest rates as key drags.

France drives the slowdown

France's composite index fell to 48.4 from 51.1, its weakest reading in four months and a sign of contraction. Services dropped to 48.4 from 51.2, while manufacturing fell to 49.3 from 50.6, an 11-month low. Reports tie the weakness to social tension and stress in debt markets, which surveyed firms say hit sales and confidence. Protests against the cost of living turned into street battles and looting on the weekend of 17 and 18 October, and student groups and members of the yellow vest movement have called new demonstrations for Saturday, 24 October. The yield on French ten-year government bonds rose above 5% this week, its highest level in 24 years, as a weakened government struggles to pass a budget through parliament. Joe Hayes, economist at S&P Global Market Intelligence, said the September rebound proved short-lived and that the October figures could preview what is still to come, while business confidence fell to a six-and-a-half-year low amid uncertainty ahead of the 2027 presidential election.

Germany and the UK diverge

Germany's composite PMI fell to 52.8 from 53.8, below the 53.3 economists had expected, and its services index eased to 51.7 from 52.9. Manufacturing rose to 54.2 from 53.9, against forecasts of 53.5. Phil Smith, economist at S&P Global Market Intelligence, said the slowdown showed that the recovery in the eurozone's largest economy remains fragile. In the UK, the flash composite rose to 53.1 from 52, its fastest pace since February and well above the 51.7 economists had forecast. Manufacturing rose to 52.8 from 51.9 and services to 53.1 from 52.1, while total new work grew at its fastest rate since September 2024 and staff numbers rose for the first time since the same month. Firms cited a general recovery in customer demand and AI investments, though some reported paused spending ahead of the Budget.

Outlook for the coming months

Chris Williamson said the UK figures give an encouraging base for robust growth through the winter, barring adverse surprises from the tax and spending review, and he flagged geopolitics as a continuing source of unease.

Geopolitics, and notably the potential for conflicts in the Middle East and Ukraine to add to energy market volatility, are, however, clearly still unsettling many businesses

He also pointed to cost of living concerns and broader fiscal worries, which are being compounded by higher borrowing costs. Eurozone input costs rose sharply in October, with manufacturers linking the increase to energy, fuel and transport, the steepest rise since May. Pessimism across the bloc was concentrated in France, where political instability contrasted with more positive sentiment in other member countries. Those readings leave France's private sector contracting, while Germany, the wider eurozone and the UK all remain in expansion.