First of all, although signaling a further slowdown in GDP growth, the level of the index is still consistent with an above-trend level of expansion. Second, the slowdown was broad-based. Although the headline manufacturing PMI remains at very elevated levels (58.5 vs 58.6 the month before), a look at the components suggests that activity is slowing.

For instance, manufacturing output (which feeds into the composite index) fell to a 16-month low (53.2 vs 55.6) and new orders slowed for the third successive month.

Ongoing supply bottlenecks remain a significant drag for manufacturers, especially the car sector.

Meanwhile, the services activity index fell to 54.7 from 56.4 in September, taking it to a 6-month low. Although services sector was always going to cool following the post re-opening boom, the survey authors point to renewed virus concerns having hurt travel and recreation sectors, predominantly in Germany (though country data on a sector level can be volatile).

Third, supply chain disruptions and rising energy prices continued to drive input and output prices up at historically high rates. This is consistent with the view that we have not yet seen the peak in eurozone inflation. Finally, there may well still be some headwinds in the pipeline for activity, especially from the energy price shock, which does not seem to be impacting the data yet. This is true of the PMI indicators, but the EC’s consumer confidence indicator also remained elevated in October.

Having said this, we still expect the economy to generally grow above trend over time, supported by strong household balance sheets, pent up demand in manufacturing and easy financial conditions.