Since July the composite index has remained above the 50-point expansion threshold. The PMI for the eurozone manufacturing sector ticked up to 51.3 points, more or less offsetting the decline seen in September. Following the strong increases seen since April, the index for the service sector took a breather. At 51.5 points, the combined index for October was slightly up on the average third-quarter level.
As we had expected, the upward trend in the eurozone economy is spreading regionally. This is evidenced not only by the first timid pickup in Spanish GDP for ten quarters (+0.1% on the previous quarter), as the Bank of Spain reported yesterday. For the third time in a row the PMIs for the eurozone excluding Germany and France signal an increase in overall output (the longest stretch since early 2011). The upswing in both Germany and France lost a little momentum.
Together with the healthy eurozone production numbers for August, business optimism and the consumer confidence figures for the eurozone published yesterday (highest level since July 2011) point to an ongoing recovery.
But risks still linger: Public-sector budget consolidation and private-sector balance sheet repair are not yet complete, despite substantial improvements in competitiveness some of the structural reforms introduced need refinement or are proving difficult to implement and, although unemployment seems to have peaked, it remains at a historically high level.
Against this backdrop we are still not expecting eurozone growth to take off. The economy is growing marginally. However, the pace of expansion seen in the second quarter is likely to be more or less maintained in the second half of the year.