Euro zone growth hits four-month low as France slips back into contraction

The euro zone economy lost momentum in October. The HCOB/S&P Global composite purchasing managers' index covering manufacturing and services fell to 51.9 from 53.1, according to a flash estimate released on Friday. It was the lowest reading in four months; economists had expected 52.7. Readings above 50 indicate growth. The manufacturing index fell to 52.4 and the services index to 51.7. S&P chief business economist Chris Williamson said the survey points to gross domestic product growth of about 0.3% per quarter.

France weighed most heavily on the picture. Its composite index fell to 48.4 from 51.1, Euronews reported, meaning the economy contracted again after just one month of growth. Companies' expectations for the next 12 months fell to their lowest since April 2020. Oxford Economics economist Rory Fennessy pointed to the volatile political situation and higher government borrowing costs. In Germany, the composite index eased to 52.8 from 53.8. Manufacturing rose to 54.2, but services fell to 51.7. The recovery in the euro zone's largest economy "remains fragile," said Phil Smith of S&P Global Market Intelligence.

At the same time, costs are rising: German companies reported the steepest increase in input prices since May, driven in part by higher oil and raw material prices. Manufacturers' confidence fell to its lowest since July. That deepens the European Central Bank's dilemma between stubborn inflation and slowing growth. Williamson said the figures were likely to fuel speculation about more aggressive policy tightening, but noted that higher interest rates were already starting to dampen demand. Euronews said the surveys do not yet point to a euro zone recession.