BENGALURU, (Reuters) – Euro zone business activity grew at its lowest pace in six month in October. Supply chain bottlenecks as well logistic issues due to the COVID-19 Pandemic pushed input costs to increase at their fastest rate for over 20 years. A survey revealed.

Although currency bloc restrictions have been lifted, shortages in raw materials are affecting growth. The pent-up demand in the service sector is also waning.

IHS Markit’s Flash Composite Purchasing Officers’ Indice (PMI) dropped to 6 months low at 54.2 in October, from 56.2 in September. It is a useful indicator of economic health and was just below its earlier estimate of 54.3 “RBflash”.

Chris Williamson (chief business economist, IHS Markit) stated that “Eurozone growth has slowed sharply” at the beginning of the fourth quarter. He said that manufacturing was hampered by supply restrictions and that services were losing momentum after the recovery from lockdowns fades.

Although the services PMI index dropped to 6 months low at 54.6 in October, it was still higher than 54.7. It is comfortably below the 50-mark that distinguishes between growth and contraction.

The new index of business declined to 55.1, from 55.3.

A survey on Tuesday showed that although manufacturing activity in the eurozone remained robust last month, it was slowed by supply chain bottlenecks. [EUR/PMIM]

These bottlenecks are causing raw material prices to skyrocket and the composite input price index has risen to 73.2 (from 70.9), the highest reading since the survey began in 1998.

Williamson explained that while “ongoing supply shortages suggest that high prices will continue into next year”, but there are not yet any signs of persistently strong wage growth which would be a bigger concern for long-term inflation prospects.”