Growth across the euro zone's private sector slowed to its weakest pace in four months in October, driven by an energy-driven rise in costs and a renewed contraction in France amid political and financial pressures, a survey showed.

The S&P Global Flash Eurozone Composite PMI Output Index fell to 51.9 in October from September's 53.1, its lowest reading since June and lower than all forecasts in a Reuters poll which had predicted a modest dip to 52.7. A PMI reading above 50.0 indicates growth.

"Key to the broader slowdown is the further escalation of inflationary pressures seen during the month," said Chris Williamson, chief business economist at S&P Global Market Intelligence. "Input costs are rising sharply again, the rate of increase surging in manufacturing on the back of higher energy prices, causing firms to push selling prices higher in order to protect margins." Input costs accelerated for the second consecutive month linked to higher energy, fuel and transport costs in part due to the Middle East war. Despite this, firms raised their selling prices at a slower pace than in September, suggesting some margin compression.

"Higher interest rates are also starting to take a toll, dampening demand, and the picture of sustained growth and stubbornly elevated inflation from the October flash PMI will likely add to further speculation of more aggressive policy tightening from the ECB," Williamson added.

The European Central Bank will hold its deposit rate at 2.50% next week but raise it by 25 basis points in December as inflation runs nearly double its 2% target, a Reuters poll found earlier this month.

Business confidence in the euro zone fell to a five-month low, the survey showed, with optimism dropping most sharply in manufacturing.

France, beset by financial pressures and political turbulence, stood out for its pessimism. Its PMI pointed to economic contraction and business confidence hit its lowest since 2012 outside the pandemic period.

French government borrowing costs have jumped in recent weeks on investor concerns about the country's ability to repair its finances, while waves of street protests have raised the political temperature ahead of a presidential election in the spring.

New orders — a key gauge of demand — grew at their slowest rate in the current four-month expansion sequence, with both manufacturing and services posting only modest gains. New export orders rose for a third consecutive month, an encouraging sign after nearly 4-1/2 years of continuous monthly declines, and the rate of increase outpaced that of overall new business.

The preliminary services PMI fell to a two-month low of 51.7 from 53.0 in September - the Reuters poll had predicted 52.5. A manufacturing output index which feeds into the composite reading dropped to a four-month low of 52.4 from 53.6. The headline factory number fell to 52.4 from 52.9.

Hiring came close to a standstill with employment barely rising after slight gains in the prior two months. Services sector job creation eased to a five-month low and manufacturing payrolls edged down after two months of improvement.