LONDON (Reuters – The euro area’s economic activity is slowing down as businesses face rising costs and ongoing COVID-19 fears.

IHS Markit’s Flash Composite Index Purchasing Managers’ Index (a reliable indicator of overall economic health) fell to 6 months low at 54.3, down from 56.2 in September.

This was the same as the forecast for the lowest level of growth in a Reuters poll, which predicted a slightly lower drop to 55.2. However it still exceeded the 50 mark which distinguishes between contraction and growth.

Chris Williamson (IHS Markit chief economist for business economics) stated that the Euro zone will start the fourth quarter with the lowest growth momentum since April due to a sharp slowdown in October.

The overall rate for economic growth has remained above the long-run average, but there are risks in the near term as the pandemic continues its disruption of economies and prices.

The coronavirus pandemic and shortages of heavy-goods vehicle drivers caused supply chain bottlenecks that led to an increase in the index for input prices from 70.9 to 73.1. This was the most significant change since mid-1998 when the survey started.

PMI fell from 56.4 to 54.7 in April. It was also lower than the forecast of 55.5 Reuters poll.

Firms hired staff at the highest rate in 14 years. In comparison to 54.1, 56.0 was the new employment index.

Manufacturing activity was strong and the PMI for factories remained at 58.6 in September. However, the composite PMI index, which measures output, fell to 53.2, from 55.6. This is its lowest level since June 2020.

Although raw material prices have increased dramatically, manufacturers were not able to pass all of that cost to customers. From 70.4 to 72.3, the output prices index rose to 72.3. This is its highest level since IHS Markit started collecting data in 2002.

Williamson stated that “average selling prices of goods and services have risen at an unprecedented rate in more than two decades. This will invariably feed through into higher consumer prices over the next months.”

It is clear that inflation’s recent spike won’t slow down, contrary to the European Central Bank’s belief that it would.