Euro zone business activity stuck in a rut, PMI shows

LONDON (Reuters) – Euro zone business activity stalled again this month, remaining in contractionary territory as demand from both home and abroad fell despite firms barely increasing their prices, a survey showed on Thursday.

HCOB’s preliminary composite euro zone Purchasing Managers’ Index, compiled by S&P Global, nudged up to 49.7 in October from September’s 49.6 but remained below the 50 mark separating growth from contraction for a second straight month.

A Reuters poll predicted a bigger lift to 49.8.

“The euro zone is stuck in a bit of a rut, with the economy contracting marginally for the second month running,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.

“The ongoing slump in manufacturing is being mostly balanced out by small gains in the service sector,” he added.

The composite new business index barely increased from September’s eight-month low of 47.7, coming in at 47.8. The new export business reading – which includes trade among euro zone members – was also sub-50.

Growth in the bloc’s dominant services industry slipped again and its PMI dipped to 51.2 from 51.4, confounding expectations in the Reuters poll for an increase to 51.5.

That was despite firms only marginally increasing their charges. The services output prices index was just above September’s 41-month low at 52.6.

The European Central Bank cut interest rates last week for the third time this year, saying inflation in the bloc was increasingly under control while the outlook for the economy was worsening.

A more than two year decline in manufacturing activity continued although wasn’t as deep as in September. The factory PMI rose to 45.9 from 45.0, exceeding poll expectations for a more modest rise to 45.3.

An index measuring output bounced to 45.5 from 44.9.

However, optimism about the year ahead waned. The future output index dropped to a 12-month low of 52.3 from 53.6

(Reporting by Jonathan Cable; Editing by Christina Fincher)