The Eurozone economy stayed “close to stagnation” in October as European Central Bank (ECB) president Mario Draghi prepares to step down.
The recession in the euro area’s manufacturing sector continued with another steep decline in output. Meanwhile, the crucial services sector suffered one of its weakest expansions since 2014.
Draghi chairs his final interest rate-setting meeting of his eight-year tenure today before he hands over to former International Monetary Fund (IMF) boss Christine Lagarde on 1 November.
Today’s weak statistics will pile pressure on Lagarde to find a cure to the Eurozone’s malaise. The ex-IMF chief has already said that “central banks are not the only game in town,” signalling that she will push euro area governments for fiscal stimulus.
Demands for goods and services fell for a second month in a row to leave the bloc with a measure of just 50.2 on data firm IHS Markit’s flash Eurozone composite purchasing managers’ index (PMI).
The closely-watched gauge measures the health of the zone’s private sector, with a score of under 50 representing contraction. Chris Williamson, chief business economist at IHS Markit, said the reading pointed “to a quarterly GDP growth rate of just under 0.1 per cent”.
Manufacturing and services’ weak performance sent business confidence to its lowest level since 2013, while jobs growth posted its worst numbers since 2014.
Williamson said the jobs market is “being hit as firms retrench amid signs of excess capacity and uncertainty about the year ahead intensifies”. Rising unemployment could further choke the services sector, which relies on consumer spending.
A rebound in business activity in France helped the euro area escape contraction, IHS Markit said, offsetting a second successive month of contraction in Germany.
Draghi’s ECB reign is set to come to an end with a whimper rather than a bang. The Bank is expected to hold fire on any further stimulus, due in large part to strident opposition by some board members.
Read more: Eurozone inflation slumps to three-year low
Jessica Hinds, European economist at Capital Economics, said: “All in all, the PMIs will make for uncomfortable reading at the ECB’s policy meeting later today and will lend weight to the doves’ calls for further policy action.”
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