The euro-area private-sector economy posted its strongest pace of expansion since May 2023 in October, according to the composite Purchasing Managers’ Index (PMI) compiled by S&P Global/HCOB. The index rose to 52.5 from 51.2 in September, marking ten consecutive months of expansion.
The growth recovery is being driven primarily by the services sector: the services PMI climbed to 53.0, a 17-month high, and new business volumes rose at the fastest rate in about 2.5 years. On the manufacturing side, progress is more modest; new orders remain stagnant and job cuts continue in parts of the industry.
Country-wise:
• Spain posted a composite PMI reading of 56.0, its strongest in ten months.
• Germany’s composite index rose to 53.9, its strongest since mid-2023.
• In contrast, France remains a weak spot: its composite PMI fell to 47.7, indicating contraction.
On the inflation front, input-cost inflation edged down to a three-month low, while companies pushed up selling prices at the fastest rate in seven months, suggesting that firms are passing on costs, but input pressures may be easing.
For monetary-policy watchers, this data will reinforce the view that the European Central Bank (ECB) can remain on hold. Indeed, the ECB kept its key rates unchanged at 2 % for the third meeting in a row.
What this means for investors
1. Improved growth backdrop - The faster expansion in services and new business inflows points to a somewhat brighter near-term picture for the eurozone economy. For HNW investors with European exposure, this supports a more constructive outlook relative to earlier in the year when growth was faltering.
2. Sector differentiation matters - The divergence between services (strong) and manufacturing (lagging) suggests it may not be enough to be “long Europe” in a broad brush. Clients may want to favour sectors tied to domestic services or leisure rather than relying purely on industrial-cycle recovery.
3. Monetary policy on hold for now - With growth firming and inflation near target, the ECB is in little rush to cut rates further (or risk being overly accommodative). That implies fixed-income portfolios should consider the possibility of rates staying at current levels longer, and equity portfolios may benefit from improved risk appetite but remain cognisant of valuation and regional risks.
4. France remains a risk anchor - While Germany, Spain, and others are accelerating, France’s contraction is a drag on the euro-zone aggregate. Clients with pan-European equity or credit exposure should be reminded of the unevenness: country risk remains relevant.
5. Watch for inflation & labour-market clues - The easing of input inflation is positive, but the uptick in selling prices and strong job growth in services hint at underlying wage and cost pressures. Keep an eye on upcoming labour‐market data (unemployment, wage growth) and inflation prints (CPI, core) as they will influence the ECB’s policy path and interest-rate expectations.
