Composite PMI rose to 47.1 in November; The Economic Expert Foundation 46.8 Then the severity of the economic contraction in Germany eased as the French recession continued, and private sector activity surveys showed that a recession in the euro zone seemed increasingly likely as the economic contraction continued in the last quarter of the year. The S&P Global PMI contracted again in November, to 47.1. While this is a bigger rise than economists expected, it marks the sixth straight month below the 50 level that represents expansion. Readings for both manufacturing and services showed a similar trend.
“The eurozone economy is stuck in the mud,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, adding that the latest figures indicated “the possibility of GDP shrinking for the second quarter in a row.” This contraction proposal – after a 0.1% decline in GDP in the three months to September – contrasts with the European Commission’s expectations for a return to growth and analysts’ expectations for a recession this quarter.
However, it chimes with European Central Bank Vice President Luis de Guindos’ warning that markets may not have fully factored in the risk of a stronger blow to the euro zone economy after a year of rising interest rates and rising political tensions. “The expectations that the markets are taking regarding the development of the economy, I would say, are somewhat optimistic and optimistic,” he said on Wednesday. “There is a bit of wishful thinking. The region’s two largest economies find themselves in the “grip of significant weakness,” according to de la Rubia, although German PMI data for November put them slightly ahead of France.
Germany’s contraction eased in November in sign that growth will return to euro zone’s largest economy
After a possible recession this year. Private sector activity declined at a slower rate than in the previous month and less than economists had expected. Both the manufacturing and services sectors saw better conditions, with new orders falling more moderately. “Although it remains in recession territory, the rate of deceleration has slowed significantly,” Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said in a statement. There is “increasing confidence that a return to the growth area is a reasonable possibility, likely to be achieved by the first half of next year.”
The German 10-year yield rose as much as 3 basis points after the data was released to an intraday high of 2.59%. French bonds changed little. The euro is trading 0.3% higher at $1.0921 amid widespread weakness in the dollar, near its highest levels over the past three months. “The positive PMI surprise from Germany could help offset some of the negative surprise from the French PMI,” said head of G10 currency strategy at Credit Agricole SA. While the impact on the euro may be mild today, the data “could still pave the way for some consolidation, especially if Germany’s Ifo institute confirms tomorrow that the worst of the economic downturn is behind us.”
With the fifth straight monthly contraction, the data still suggests that a recession will be difficult to avoid in the six months to December. The German central bank said this week that production will begin to expand next year only as household incomes recover and things improve in the country’s important industrial sector.
Markets monitor PMIs
Markets watch PMIs closely when they arrive early in the month and are good at detecting trends and turning points in the economy. It can sometimes be difficult to link business surveys, which are a measure of the breadth of changes in output rather than the depth, directly to quarterly GDP. In light of French activity on a steady downward path this month. The Standard & Poor’s Global Purchasing Managers’ Index was little changed at 44.5.
“The French economy has reached a bit of a standstill,” the economist says. “It seems as if geopolitical and economic uncertainty played a major role here, with some companies citing that as a reason for the lack of new orders.” Manufacturing and services industries have also suffered in the region’s second-largest economy. The euro suffered from weak demand.With untapped business capacity rising, the data indicated the first decline in private sector employment in three years.
Inflation remained a problem in France and Germany, where service companies blamed rising wages for pushing up input prices, and output duties continued to rise. “Forecasts indicate that inflation is unlikely to see a significant decline in the coming months,” De La Rubia said. Then earlier PMI numbers from Australia pointed to a deeper decline. British figures are expected to indicate a stable decline. US data will not be published until Friday due to the Thanksgiving holiday and is expected to show a slight expansion. “However, price pressures associated with non-energy consumption categories are expected to ease, broadly in line with previous expectations and in the context of slightly tighter financing conditions, moderation in wage growth and normalization of dividends,” the Commission said.
The European Union says the euro zone will avoid recession as inflation declines
Commission expects growth of 0.2% in the fourth quarter and 0.6% in 2023 in debt reduction will pause in some of the largest EU economies The euro zone and its largest economies will avoid recession as growth returns at the end of the year, supported by slowing inflation and a strong labor market, according to new EU forecasts. .
Output in the 20-nation bloc will rise 0.2% in the fourth quarter after contracting 0.1% in the three months to September, the European Commission said in a report on Wednesday. Even Germany, which has performed worse than its peers amid a prolonged slump in the manufacturing sector, is expected to avoid a recession. For the full year, the EU’s executive arm is now seeing growth of 0.6%, down from September’s forecast of 0.8%. This is expected to rise to 1.2% in 2024 and 1.6% in 2025 – a slightly more optimistic view than that of the ECB.
“Strong price pressures and the monetary tightening necessary to contain them, as well as weak global demand, have negatively affected households and companies,” European Union Economic Commissioner Paolo Gentiloni said in a statement. “Looking ahead to 2024, we expect a modest pickup in growth as inflation declines further and the labor market remains resilient.” Price growth is expected to average 5.6% this year and then decline to 3.2% in 2024 and 2.2% in 2025. This is similar to the European Central Bank’s forecast and an upward revision for next year compared to the EU’s forecast in September, driven by higher energy and food costs.
