- Thursday's release of euro area PMIs was a tad better than expected, driven by an improvement in the manufacturing component. The euro area leading indicator has stabilised at a level that is still signalling recession in Q4.
- French PMI data improved in both manufacturing and service, while the German figures only rose in the manufacturing component. Manufacturing new orders increased and the order-inventory balance indicates further improvements over the coming months.
- The euro area continues to face strong headwinds. Nevertheless, we expect PMIs to increase moderately over the coming months and the euro area to be out of recession in H1 13.
The composite PMI increased to 45.8 from 45.7 and signals GDP growth at around -0.2% q/q. Despite today’s moderate improvement in data including the forward-looking components, the euro area will most likely be trapped in a recession in Q4.
Euro area flash manufacturing PMI increased to 46.2 in November from 45.4 in October, while service PMI declined to 45.7 from 46.0. Manufacturing PMI new orders increased slightly to 44.1 from 43.3 and export orders improved from 45.3 to 45.9. The orderinventory balance indicates that we should see further improvements over the coming months. This is also supported by the signals from our six-month forward model. We expect PMIs to increase moderately over the coming months and the euro area to be out of recession in H1 13.
Germany managed to avoid contraction in Q3 but the growth engine might not avoid negative growth in Q4. German flash manufacturing PMI increased to 46.8 in November from 46.0, while service PMI decreased to 48.0 from 48.4. While the headline figure was broadly as expected, the details were slightly better. New manufacturing orders increased from 43.7 to 45.0.
Also export orders improved, while stocks of finished goods declined, so the order-inventory balance increased substantially. The manufacturing employment index has increased to 49.4. Ifo data tomorrow will be very interesting as we have already seen a stabilisation and we are now looking for an improvement in the expectations index.
French flash manufacturing PMI improved from 43.7 to 44.7 and also service PMI improved to 46.1 in November from 44.6 in October, which was a cycle-low. The details were also decent. The French manufacturing new orders increased from 40.3 to 42.1 and export orders are up from 43.8 to 46.1. The levels are still very low.
The employment component is also improving. France is in recessionary territory and although today’s releases hint at minor improvement going forward the economy remains very fragile. The French housing market remains a concern.
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