Eurozone PMIs improve but signal weaker 2014 prospects

(BRUSSELS) - Eurozone business activity slowed in October, but less sharply than thought although by enough to dampen hopes for a strong recovery next year, a key survey showed on Wednesday.

The closely-watched Composite Purchasing Manager's Index (PMI) compiled by Markit Economics fell to 51.9 points in October from 52.2 in September.

But this final reading was better than the initial 51.5 given two weeks ago.

Holding above the 50 points boom-bust line, the report suggests the 17-member single currency area continued to expand at the start of the fourth quarter.

The eurozone escaped a record 18-month recession in the second quarter with growth of 0.3 percent, but recent data has pointed to a slowdown in that pace, stoking concerns the recovery will be only modest at best.

The survey is considered to be a reliable leading indicator of how activity will turn out in official data.

Markit said a stronger manufacturing sector supported the overall improvement, with top economy Germany leading the way, France stabilising after faltering, and an upturn in the eurozone periphery becoming more marked.

Ireland, for instance, posted an 80-month high reading of 58.8 points as it makes up some of the ground lost during its bailout years.

Markit said job creation in Ireland was strong, with France reporting new positions opening.

Although the improvement on the initial estimate was welcomed, Markit chief economist Chris Williamson said the "loss of momentum raises concerns that the upturn is faltering."

Williamson said the latest hard data from the ground, a day after the European Commission downgraded its 2014 eurozone growth forecast to 1.1 percent from 1.2 percent, would make for sober reading at the European Central Bank.

The survey, based on some 5,000 firms in the single currency area, "piles pressure" on the ECB "to reinvigorate the recovery," especially with "concerns about deflation taking hold," he said.

At the same time, no "clear cut" case yet existed for renewed stimulus, he added.

IHS Global Insight analyst Howard Archer said the figures point to a even slower growth for the eurozone next year than the Commission predicted.

"While the eurozone is unlikely to relapse back into recession, recovery will remain tortuously slow," Archer said, forecasting 0.8 percent in 2014.

"The hope for the eurozone remains that a combination of recent steadily rising confidence, very accommodative monetary policy, very low inflation and reduced fiscal tightening will fuel gradual recovery," he said.