Euro area PMIs stayed at recession levels in November, despite increasing slightly.Composite PMI increased to 47.2 from 46.5. The continued fall in manufacturing new orders is somewhat worrying as it signals further decreases.
We expect the euro area to be in recession with negative growth in Q4 and Q1. The euro area economy is faced with strong headwinds from ongoing fiscal consolidation and the deleveraging in the bank sector, which is likely to weigh on both investments and private consumption.
Details and outlook
Euro area flash manufacturing PMI fell to 46.4 in November from 47.1 in October of particular concern is the continued decrease in manufacturing new orders, which fell from 43.4 to 42.2, and new export orders, which fell from 44.2 to 43.1. This indicates that the decline is driven by both export and domestic orders. Confidence in the service sector increased from 47.8 to 46.4. The composite index increased from 46.5 to 47.2. Overall, this is somewhat better than consensus of 46.1.
The PMI numbers released today continue to signal that the euro area is in recession. We expect negative growth in Q4 and Q1. The euro area economy is facedwith strong headwinds from ongoing fiscal consolidation and the deleveraging in the banksector, which we expect to weigh on both investments and private consumption. Todays release of Chinese PMIs showed a sharp fall in November from 51 to 48. This is very worrying, as the euro area relies heavily on external demand. We expect growth in the coming one to two years to improve slightly but remain low, as the unwinding of imbalances in both the public and private sector continues. This prompted the ECB to cut rates in November and we expect it to continue in December and cut at least 25bp.
Our six months forward model indicates that we are close to the bottom but other models are signalling further falls following the escalation of the debt crisis.
German flash manufacturing PMI fell to 47.9 in November, from 49.1 in October, which was worse than expected. More worrying is the decrease in manufacturing new orders from 45.1 to 42.6 and the fall in export orders from 42.2 to 41.3. Confidence in the service sector increased from 50.6 to 51.4. French flash manufacturing PMI fell from 48.5 to 47.6, clearly below the boom-bust level signalling contraction, while service PMI increased sharply from 44.6 to 49.3. The service component has been very volatile recently. Manufacturing new orders decreased slightly to 44.0. Overall, the numbers are slightly better than consensus expectations.
We expect the euro area to be in recession with negative growth in Q4 and Q1. The euro area economy is faced with strong headwinds from ongoing fiscal consolidation and the deleveraging in the bank sector, which is likely to weigh on both investments and private consumption.
Details and outlook
Euro area flash manufacturing PMI fell to 46.4 in November from 47.1 in October of particular concern is the continued decrease in manufacturing new orders, which fell from 43.4 to 42.2, and new export orders, which fell from 44.2 to 43.1. This indicates that the decline is driven by both export and domestic orders. Confidence in the service sector increased from 47.8 to 46.4. The composite index increased from 46.5 to 47.2. Overall, this is somewhat better than consensus of 46.1.
The PMI numbers released today continue to signal that the euro area is in recession. We expect negative growth in Q4 and Q1. The euro area economy is facedwith strong headwinds from ongoing fiscal consolidation and the deleveraging in the banksector, which we expect to weigh on both investments and private consumption. Todays release of Chinese PMIs showed a sharp fall in November from 51 to 48. This is very worrying, as the euro area relies heavily on external demand. We expect growth in the coming one to two years to improve slightly but remain low, as the unwinding of imbalances in both the public and private sector continues. This prompted the ECB to cut rates in November and we expect it to continue in December and cut at least 25bp.
Our six months forward model indicates that we are close to the bottom but other models are signalling further falls following the escalation of the debt crisis.
German flash manufacturing PMI fell to 47.9 in November, from 49.1 in October, which was worse than expected. More worrying is the decrease in manufacturing new orders from 45.1 to 42.6 and the fall in export orders from 42.2 to 41.3. Confidence in the service sector increased from 50.6 to 51.4. French flash manufacturing PMI fell from 48.5 to 47.6, clearly below the boom-bust level signalling contraction, while service PMI increased sharply from 44.6 to 49.3. The service component has been very volatile recently. Manufacturing new orders decreased slightly to 44.0. Overall, the numbers are slightly better than consensus expectations.