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Eurozone Private Sector Logs Subdued Growth

eurozonepmi oct24 22nov19 lt

Euro area private sector grew at a much slower pace in November, indicating spillover effects from manufacturing to the services activity, flash data from IHS Markit showed Friday.

The composite output index fell unexpectedly to 50.3 in November from 50.6 in October. The expected reading was 50.9.

Although a score above 50 indicates expansion, it signaled the second slowest growth across manufacturing and services since the current upturn began in July 2013.

The services Purchasing Managers' Index dropped to 51.5 from 52.2 in the previous month. Economists had forecast a score of 52.4.

Meanwhile, the manufacturing PMI rose to 46.6 from 45.9 a month ago. The score was forecast to drop to 46.4.

"The Eurozone economy remained becalmed for a third successive month in November, with the lacklustre PMI indicative of GDP growing at a quarterly rate of just 0.1 percent, down from 0.2 percent in the third quarter," Chris Williamson, chief business economist at IHS Markit, said.

New orders fell for the third straight month. The survey showed signs of the steep ongoing manufacturing decline spreading further to services.

Employment growth slipped to the lowest for almost five years as firms took an increasingly cautious approach to hiring. Price pressures also cooled, running at the lowest for over three years.

The survey revealed that Germany and France saw some signs of improvement, while the rest of the euro area saw output fall, albeit only marginally. Nonetheless, France continued to outpace Germany.

Germany's private sector shrank at a moderate pace compared to October. The composite output index rose to 49.2 in November from 48.9 in the previous month. The reading was slightly below forecast of 49.3.

Manufacturing remained the main area of weakness in November. The factory PMI advanced to a five-month high of 43.8 from 42.1 in October.

The services PMI fell to a 38-month low of 51.3 from 51.6 in the previous month. The expected score was 52.0. Services output grew at the weakest pace since September 2016.

Elsewhere, France private sector logged strong growth in November. The composite output index rose slightly to 52.7 from 52.6 in October, but below the forecast of 52.8.

The survey showed that the current run of expansion extended to eight months and was driven by gains across both the manufacturing and service sectors.

The services PMI held steady at 52.9 in November. The score was expected to rise to 53.0.

At the same time, the factory PMI advanced to 51.6 from 50.7 a month ago and stayed above expectations of 50.9. The sector registered its fastest increase in output since June.

Overall, while there is some encouragement in today's data releases for the German industry, these are offset by signs that the services sector is now struggling too, Andrew Kenningham, an economist at Capital Economics, said.

And none of this changes the fact that Germany is still flirting with recession and the Eurozone economy as a whole is very anaemic, the economist added.

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