Euro zone business growth remains weak in October despite deep price cuts: PMI
By Jonathan Cable
LONDON (Reuters) - Euro zone business growth picked up less than expected in October despite much deeper price cutting, according to business surveys on Wednesday that gave scant reason to be optimistic about the months ahead.
Firms have now been reducing prices for over 2-1/2 years and did so last month at the steepest rate since early 2010, just when the single currency bloc was sinking into the depths of a financial crisis.
Weak growth and further discounting will add to pressure on the European Central Bank as it battles to ward off deflation and bring inflation - at a meager 0.4 percent in October - out of what it terms the "danger zone" and back to target.
Markit's final Composite Purchasing Managers' Index, based on surveys of thousands of companies across the region and seen as a good indicator of growth, only nudged up from September's 10-month low of 52.0, coming in at 52.1.
Although it marked the 16th month that the index has been above the 50 line that separates growth from contraction, the expansion came at a cost.
A sub-index for output prices slumped to 47.1 from September's 48.5, its lowest reading since February 2010. "The combined threat of economic stagnation and growing deflationary risks will add to pressure on the ECB to do more to stimulate demand in the euro area, strengthening calls for
full-scale quantitative easing," said Chris Williamson, chief economist at Markit.
Full-scale QE is one of the last policy options the ECB has left, and while it is not expected to change policy on Thursday, there is now an even chance it will buy sovereign bonds, a Reuters poll found this week. Continued...