Eurozone economy in good shape, Trump gives no cause for concern

The preliminary release of the results of the purchasing manager’s survey in the EMU reveals a visible improvement in sentiment among European purchasing managers in November. The Composite Index has risen from 53.3 to 54.1 index points, marking the highest level in 11 months. Largely responsible for this gain is the services sector which registered a renewed strong increase from 52.8 to 54.1 index points. In the manufacturing sector, only a slight gain was noted of 0.2 to 53.7 index points. The purchasing managers claim that new orders are on the rise. This has resulted in higher order volumes and the second-largest boost to employment since February 2008. At this juncture there cannot be any talk of a deterioration in sentiment due to the unexpected outcome of the US presidential election. The sentiment barometers reveal no signs of a negative „Trump effect“. If anything, the Eurozone economy is far likelier to have added to this growth in the final quarter on the basis of the preliminary survey results.

In Germany, the comprehensive Composite Index declined slightly from 55.1 to 54.9 index points. Sentiment in industry declined by 0.6 to 54.4 points while the service index climbed by 0.8 to 55 points. According to the research agency Markit, the German private sector has recorded a solid rise in new orders even if the increase is slightly lower than in the previous month. According to the purchasing managers, the buoyant intake of new orders and growth in order volumes is creating fresh impetus for jobs, a trend that has been unbroken for some three years. On the price front, pressure remains. Both purchasing prices and selling prices have risen further. All in all, the index figures for sentiment among purchasing managers in November have further exceeded the average readings for this year to date. Given the underlying sentiment, a renewed acceleration in economic growth could be on the cards once again in the final quarter.

The figures published today for France also revealed a slight improvement. While the index for the manufacturing sector declined marginally by 0.3 to 51.5 index points, it remained above the growth threshold in November after having fallen below this level between March and September. As regards the French service sector, sentiment has brightened from 51.4 to 52.6 index points. The comprehensive Composite Index thus recorded improvement overall from 51.6 to 52.3 points. All in all, business activity in the French private sector is edging upwards, largely powered by the service sector which reported higher new orders and rising employment in the survey. Based on the latest sentiment barometers, the French economy can be expected to continue expanding, with a somewhat stronger acceleration in the growth pace likely, starting out from the +0.2 percentage growth from the third quarter.

 

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