Private sector business activity continued to contract in October, albeit by less than expected and at a marginally slower rate than in September. The flash composite output index edged up from September's final 49.6 to 49.7, some 0.3 points stronger than the market consensus but only a 2-month high.

The minimal headline improvement was attributable to the manufacturing sector where the flash sector PMI rose from 45.0 to 45.9, a 5-month peak. Within this, the output sub-index increased from 44.9 to 45.5. By contrast, the services PMI remained in positive growth territory but, at 51.2, was down from 51.4 in the previous month.

Aggregate new orders fell for a fifth straight month and at much the same pace as in August on the back of weakness in both the domestic and overseas markets. Backlogs were also pared further while employment decreased for the third month running and at the fastest pace since the end of 2020. Business confidence in the year ahead continued to worsen and hit its weakest point in almost a year.

Inflation pressures eased. Although both input costs and output prices rose, inflation rates slowed again.

In sum, the flash October results are consistent with little, or no growth in the Eurozone economy at the start of the quarter. Accordingly, with inflation pressures also on the wane, the chances of another cut in ECB interest rates in December have just risen a little higher. Today's data put the region's RPI at 9 and the RPI-P at 5, both gauges showing economic activity in general broadly matching market expectations.

The euro area composite index is expected to contract at 49.4, a slight decline from September's 49.4. The manufacturing index is also expected to continue to decline at 45.1, no better than September's 45.0. The services industry, however, is expected to expand at 52.7, though at a slower pace than in September.

The flash Composite Purchasing Managers' Index (PMI) provides an early estimate of current private sector business activity by combining information obtained from surveys of the manufacturing and service sectors of the economy. The flash data are released around ten days ahead of the final report and are typically based upon around 75-85 percent of the full survey sample. Results covering a range of variables including manufacturing output, employment, new orders, backlogs and prices are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). The report also contains flash estimates of the manufacturing and services PMIs. The survey, produced by S&P Global uses 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.