Euro zone sentiment drops to two-year low in October

Euro zone sentiment fell to a two-year low in October, data showed on Friday, as confidence in industry and services declined, but there was slight comfort from some views of future improvements and from a decline in inflation expectations.

The European Commission's monthly economic sentiment index fell to 92.5 points in October from 93.6 in September, exactly in line with the average forecast by economists polled by Reuters.

Confidence fell in industry and services, but picked up slightly for construction, retail trade and among consumers, Commission's data showed, the latter bouncing back from a record low in data stretching back to 2000.

Manufacturers became more downbeat on order books and the production trend over recent months, although took a slightly more positive view on production expectations.

In services, companies were also more negative on business over the past three months and took a similar view for demand over the next quarter.

Consumers gave a grim assessment of current conditions, but were a little more upbeat on their view for the economy and their own financial situations the next year, although signalled no greater readiness to make major purchases.

Inflation and selling price expectations dipped for consumers and industry, although were higher for services, providing some comfort to the European Central Bank, which raised interest rates to their highest level since 2009 on Thursday.

It said "substantial" progress had already been made in its bid to fight off a historic surge in inflation.