The Eurozone economy began the current quarter on a soft note. At 46.5, the final composite output index was unrevised from its flash estimate but well below the 50-growth threshold and down from September's final 47.2. The latest outturn signalled the worst performance by the economy in some 35 months.

The flash service sector PMI was also unrevised at 47.8, its weakest reading in 32 months. Ominously, within this, new business declined at the steepest rate since January 2021 as demand at home and abroad continued to slide. Backlogs were down for a fourth successive month and although employment growth remained positive, it was only modest and weaker than in September. Looking ahead, business expectations improved but remained short of their long-run average. Input costs eased slightly but still posted a significant rise, but output price inflation registered its lowest mark since May 2021.

In terms of national composite output indices, the best performing member state was Spain (50.0) which was the only country to achieve the growth threshold. Ireland (49.7) was not far behind but Italy (47.0) and, in particular, both Germany (45.9) and France (44.6) were well short.

Today's update offers little new on the state of overall Eurozone economic activity. Still, having dipped in the third quarter, GDP would seem to be on course for another decline in the current period which would put the region into technical recession. While inflation still dominates ECB policy, confirmation of a downturn would make it all the more likely that the next move in official interest rates will be down. That said, at minus 4 and zero respectively, the region's RPI and RPI-P show economic developments in general moving in line with market expectations.

No revisions are expected leaving the key composite output index at 46.5, down from September's final 47.2.

The Composite Purchasing Managers' Index (PMI) provides an estimate of private sector output for the preceding month by combining information obtained from surveys of the manufacturing and service sectors of the economy. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) output versus the previous month and the closer to 100 (zero) the faster is output growing (contracting). The report also contains the final estimate of the services PMI. The data are provided by S&P Global using a representative sample of around 5,000 manufacturing and services companies, the former including Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece and the latter Germany, France, Italy, Spain and the Republic of Ireland.

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the purchasing managers' manufacturing indexes, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.