Eurozone manufacturing raises the pace in October

Manufacturing activity continued to drive the eurozone economy in October, according to the latest survey of the region's purchasing managers.

Activity in the services sectors, however, slowed more than expected, leaving the composite eurozone purchasing managers' index (PMI) lower than in the previous month.

The headline composite PMI of both manufacturing and services activity eased to a two-month low of 55.6 in October, from 56.7 in September.

Manufacturing PMI

The PMI data showed the headline manufacturing index rose to 58.6 in October, from 58.1 in September, thanks to continued strong growth in Germany, whose own manufacturing index eased slightly to 60.5 from 60.6 but still beat expectations of a dip to 60.2.

Germany is the eurozone's powerhouse economy and a PMI reading of 60 indicated robust health for its manufacturing sector. Any PMI reading above 50 indicated expanding business activity.

France, meanwhile also contributed strongly, with its manufacturing index rising to 56.7 from 56.1.

New orders rose, with export growth picking up from levels seen in September, but the highlight of the report was a sharp rise in employment across the private sector - the strongest rate of job creation in more than a decade, said IHS Markit, compiler of the surveys.

Service sector growth in the eurozone slowed slightly in October: Shutterstock

Services PMI

Growth in the service sectors, however, appeared to slow slightly with the headline eurozone services index dipping to 54.9 in October from 55.9 in September - also a two-month low.

Job creation here, too, was a highlight, but business confidence eased in October.

Strong euro

Companies appeared unperturbed by the relative strength of the euro, which remains 9.4% higher on the US dollar year to date.

“Firms don’t appear to have been unduly affected by recent euro strength, with growth of new export orders accelerating in October," said Andrew Harker, associate director at IHS Markit.

"Healthy demand in export markets appears to be outweighing any negative currency impacts."

Market reaction

The euro moved 0.1% higher to $1.1762 against the dollar and was up 0.1% against the pound, too, at €1.1220.

European stock market outperformed, with the EuroStoxx 50 up 0.1% compared to a 0.1% fall on the UK's FTSE 100.

France's Cac 40 was up 0.3%, while Germany's Xetra Dax index added 0.1%.