Euro area service sector activity rebounds slightly in October, sentiment remains at five-year low

The euro area economy continues to be close to stagnation as new work drops again. The HIS Markit Services Business Activity index rebounded a bit in the month of October, indicating a slightly more rapid pace of growth. The index rose to 52.2 from September’s 51.6; however, it is the second-lowest reading since January.

A slight rise in new business volumes was hinted in October, with growth just slightly up on September’s eight-month low. Export trade continued to be soft, falling for the 14th straight month. There was little evidence of any pressure on capacity in the month as backlogs of work dropped for the third straight month. Firms were able to keep on top of workloads in part through the recruitment of additional staff. However, employment growth remained the same at September’s eight month low.

Meanwhile, operating expenses rose at their sharpest rate for five months in the midst of broadest reports of higher employment costs. Although output charges also rose, they did so at the rate that stayed quite below that of input prices. The service sector sentiment stayed well below par in October, dropping to a level only slightly above August’s almost five-year low.