- Prior 51.6
- Composite PMI 48.3 vs 48.1 prelim
- Prior 50.0
Despite the slightly better revisions, both the services and composite readings are at 10-month lows. Weak demand conditions are being cited as the main reason new orders declining again and this time at its sharpest rate for this year. Employment conditions are starting to look shaky but that mostly owes to the manufacturing recession in the region. HCOB notes that:
“Stagflation is a pretty nasty word, especially if you are a central banker, but that is what is hitting the eurozone right now. In
November, the economy started shrinking while the PMI price components went up for the second month in a row. Inflation
is mainly driven by services, but with the euro getting weaker, there is a risk that the prices of imported goods might start
climbing too in the coming months.
“The European Central Bank (ECB) is in a tough spot. The economy is struggling and really needs some monetary support.
However, inflation is stubbornly high, as highlighted by significant wage increases in the third quarter. So, the ECB is likely to
avoid aggressive rate cuts and instead might carefully lower rates by 25 basis points on December 12.
“The services sector, which had been holding up the overall economy, is now shrinking for the first time since January. This
is bad news for overall growth prospects, especially since this weakness is seen across the top-three euro economies. This
broad-based decline might be due to consumer uncertainty, fuelled by political issues in France and Germany and the threat
of trade wars linked to Donald Trump’s election in the US. Our GDP nowcast, which includes PMI data among other
indicators, predicts stagnation in the final quarter of 2024.
“An early recovery in the services sector doesn’t seem likely, as new business has dropped for the third consecutive month.
Although employment saw a slight uptick in November after nearly stagnating the previous month, this shouldn’t be seen as
a sign of recovery. Most other indicators suggest more challenging times ahead.”
