- Prior 51.3
- Composite PMI 52.5 vs 52.2 prelim
- Prior 51.2
The euro area services sector is finding a resurgence in October, jumping up to its highest in 17 months. Meanwhile, the composite reading is also seen nudging up to its highest in 29 months. That comes amid a big boost in Germany in particular, but also helped by positive sentiment in the likes of Spain and Italy. Meanwhile, France was the only real drag as the tables have now turned again.
The good news is that demand conditions once again picked up overall with employment conditions also holding up. In fact, the rate of job creation was the quickest since June 2024. As for inflation developments, input cost inflation cooled to a three-month low and fell further below its long-term average but selling charges rose at the strongest rate since March.
“Finally, there’s something positive to report about the eurozone economy again. The services sector saw a solid upswing in October. When it comes to new business, you’d have to go back to May of last year to find a similarly strong increase. In this environment, service providers also hired more staff than in the previous month, which sparks hope for sustained growth.
“A key driver of growth in the services sector this October was Germany. The jump in the index there — up more than three “points to 54.6 — is striking and more than offsets the decline in France, where political tensions are dampening people’s willingness to spend. Keeping up this relatively strong growth momentum in the services sector over the coming months won’t be easy. In France, political stability would help — passing the 2026 budget would be a step in that direction. In Germany, much will depend on whether the government’s stimulus package actually motivates businesses and households to invest and spend more.
“Cost inflation in the services sector has eased a bit, but selling price inflation ticked up. For now, though, there’s no sign of broader inflationary pressure. This is because economic growth remains moderate, and the tariff dispute with the U.S. is creating disinflationary effects in the eurozone — partly due to increased imports from China. These PMI figures are unlikely to give the European Central Bank much of a headache.
“France is clearly putting the brakes on eurozone economic growth. On the bright side, it’s not just Germany where the expansion rate has picked up significantly. Even when excluding Germany and France, the composite PMIs for the rest of the eurozone show the strongest growth in two-and-a-half years. In this sense, the recovery is gaining broader traction.”
