RPT-WRAPUP 1-Euro zone PMIs show economy lost momentum

* Survey shows more evidence of two-speed recovery

* Service sector grows at slower pace this month

* Manufacturing sector growth accelerates

* Reuters Insider show: http://link.reuters.com/wah49p

(Adds comment, graphic, market reaction, details)

By Jonathan Cable

LONDON, Oct 21 (BestGrowthStock) – The euro zone’s economic recovery
lost momentum this month as a surprise upswing in Germany was
offset by slowing growth in France, while manufacturers
countered a poorer performance in the service sector, surveys

Markit’s Eurozone Flash Services Purchasing Managers’ Index,
made up of surveys of around 2,000 businesses ranging from banks
to restaurants, fell to 53.2 in October from September’s 54.1,
its lowest reading since February.

The index has now been above the 50.0 mark that divides
growth in business activity from contraction since August 2009
but was shy of the consensus forecast in a Reuters poll for

“They are going at a different speed and Germany is leading
the way … It has been the theme for quite a while,” said
Silvio Peruzzo at RBS.

The manufacturing sector, which drove a large part of the
economic recovery last year, saw activity pick up faster than
expected this month, driven by a buoyant Germany and strong new

The flash manufacturing index rose to 54.1 in October from
53.7 in September, confounding forecasts for a fall to 53.2,
while the output index slipped to 53.8 this month, from 54.0 in

The euro (EUR=: ) extended earlier gains to a session high of
$1.4023, supported by the data and after stops were triggered on
a break of the $1.40 level.


For a graphic see:



France’s service sector grew much more sluggishly than last
month and at its slowest pace since March while its
manufacturing sector saw growth tail off slightly more than

But figures on Thursday showed French business confidence
rose in October as demand from abroad drove a spike in new
orders despite the country being mired in a wave of strikes
protesting government austerity plans.

Data from neighbouring Germany, Europe’s biggest economy,
showed the pace of growth accelerated with both its service and
manufacturing sectors expanding much faster than expected.

Figures on Tuesday showed Germany’s ZEW sentiment index, a
key gauge of analyst and investor sentiment, fell less than
expected in October, bolstering hopes that any slowdown in
Europe’s powerhouse economy will be milder than forecast.

The euro zone manufacturing sector’s new orders index rose
to 54.3 this month from 53.2 in September, despite the euro
hitting 8-month highs against the dollar last week, with
companies reporting increased sales to China, Eastern Europe,
the U.S. and from within the bloc itself.


The composite index, made up from the services and
manufacturing sectors and often used to predict overall growth,
dropped to 53.4 this month from 54.1 in September, missing
expectations for 53.6.

Ben May at Capital Economics said the composite index was
pointing to a sharp slowdown in quarterly GDP growth to about
0.3 percent from a robust 1.0 percent in the second quarter.

The euro zone escaped from its deepest recession in post-war
history in the third quarter of last year, having pumped
billions of euros into recovery measures, and relatively strong
second-quarter growth of 1.0 percent surprised markets.

Economists in a Reuters poll say growth has since slowed and
expect the economy to expand between 0.2 and 0.4 percent per
quarter through to the end of next year. (EUGDPQ: )

The service sector’s backlogs of work index slumped to 49.6
this month — its first time below 50 since January — from
September’s 51.6, signalling firms were not operating at full

Companies hired fewer new workers this month, with the
composite employment index falling to 51.0 from 51.4 in
September. The manufacturing sector took on staff at the fastest
pace since March 2008 but job creation slowed to show almost no
growth in services.

Data released earlier this month showed unemployment was at
10.1 percent in August, having hovered around 10 percent for
five months.

(For economists’ views see [ID:nLDE69J19S])

(For foreign exchange reaction click on [FRX/] and [USD/])

(For bond market reaction click on [GVD/EUR])

(For a guide to all PMI indices (PMI/INDEX1: ))

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(Editing by Toby Chopra, John Stonestreet)

RPT-WRAPUP 1-Euro zone PMIs show economy lost momentum