Economists in a Reuters poll had expected a eurozone business activity reading of 52.7 in October. The S&P Global Flash Eurozone Composite PMI Output Index instead fell to 51.9, from 53.1 in September, undershooting every forecast in the poll.
The result was the weakest since June. A reading above 50 signals expansion and one below 50 signals contraction, leaving the currency union in growth territory while showing a marked loss of pace.
Services slowed to a two-month low and manufacturing output fell to a four-month low. New orders grew at their slowest pace in the current four-month expansion sequence, while new export orders increased for a third consecutive month.
Costs were a central pressure. Input costs accelerated for a second consecutive month, linked to higher energy, fuel and transport costs. The escalating conflict in the Middle East was among the factors affecting energy costs.
“Key to the broader slowdown is the further escalation of inflationary pressures seen during the month,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
France was a particular drag. Business activity there unexpectedly contracted, with its flash composite output index falling to 48.4 in October from 51.1 in the previous month, a four-month low.
French business confidence reached its lowest level since 2012, excluding the pandemic period. Street protests have added to political tensions before a presidential election scheduled for the spring, while French government borrowing costs have risen sharply in recent weeks.
Germany and the other member countries taken together continued to grow in October, though at a slower pace. Across the euro zone, business confidence dropped to a five-month low.
Employers also pulled back. Hiring across the single currency area came close to a standstill, and manufacturing payrolls edged lower after two months of improvement.
Williamson said the October reading was consistent with gross domestic product growing at a 0.3 percent quarterly cadence. A further loss of momentum would raise the risk of eurozone growth stalling.
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