Protest by the “Yellow Vests” sends French PMIs crashing

The preliminary survey among European purchasing managers points once again to weaker economic activity in Euroland in December. The comprehensive Composite Index fell from 52.7 to 51.3 points and thus to the lowest level in over four years. All in all, the PMIs indicate a weaker pace of economic growth in Q4 2018. Especially in France sentiment has sagged considerably. However, it has also gone further downwards in Germany.

In Euroland, order receipts have almost ground to a halt, and export orders presumably fell for the third consecutive month. The creation of new jobs was lower than in two years, and business expectations continued to dim. Concerns about global trade and the environment for growth squeezed prospects as did the increasing political uncertainty and the lack of clarity on Brexit. The protests by the “Yellow Vests” in France and ongoing weak demand for cars have, so British market monitor IHS Markit, strongly depressed purchasing manager sentiment.

In Germany, purchasing manager sentiment has likewise weakened. The Composite Index shed 0.1 points and according to the preliminary figures reached 52.2 points, the weakest level in four years. The figures for both service providers and industry both dropped, although industry purchasing managers recently reported a slight rise in industrial output. This was, however, more than outweighed by the decreases in order receipts. Sales of preliminary outputs were also down. Business expectations likewise weakened. The only positive was that surveys from both sub-segments reported growing intentions to hire new staff.

The ongoing protest by the “Yellow Vests” considerably impacted sentiment among French purchasing managers. The Composite Index slumped by 4.9 points to land at 49.3 points in December. This is not only the lowest level in two and a half years, but also below the growth threshold of 50 index points. The indices for both sub-segments, namely industry and the service sector, slipped below the critical yardstick. The crunch was especially pronounced amongst service providers, where the index plummeted 5.5 points to come to rest at only 49.6. According to IHS Markit, service-sector purchasing managers reported that the protests had clearly impaired the business situation. In industry, parts of the output problems were again attributed to the car industry and less to the wave of protests. The survey results now available suggest that the pace of economic growth seen in the third quarter of 0.4% will definitely not be matched in Q4 2018.

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