Eurozone PMI Signals Shallow Technical Recession
The ongoing downturn in the euro area private sector suggested
that the region might have entered a shallow recession in the final
quarter of 2023, according to the latest purchasing managers'
survey results released by S&P Global on Thursday.
The HCOB flash composite output index rose to 47.1 in November
from 46.5 in October. The reading was also above economists'
forecast of 46.9.
Nonetheless, the score was below the natural 50.0 mark for the
sixth straight month, indicating a contraction in the private
sector. "Considering the flash PMI numbers for November in our
nowcast model indicates the potential for a second consecutive
quarter of shrinking GDP," Cyrus de la Rubia, chief economist at
Hamburg Commercial Bank, said.
"This would align with the commonly accepted criterion for a
technical recession," Rubia added.
Although the November PMI does not provide much evidence that
eurozone GDP growth will turn positive in the fourth quarter, the
good news is that the downturn is not deepening, ING economist Bert
"We're currently likely in a very shallow technical recession,"
Capital Economics' economist Adrian Prettejohn said the PMI
score is consistent with the euro area economy contracting 0.2
percent in the fourth quarter.
Both manufacturing and services sectors shrunk in November but
the rate of deterioration was more pronounced in manufacturing, the
Manufacturing output dropped for the eighth straight month and
services decreased for the fourth consecutive month.
The services Purchasing Managers' Index, or PMI, posted 48.2, up
from 47.8 in the previous month. The score was seen at 48.1. At
43.8, the manufacturing PMI hit a six-month high. The score was
forecast to rise to 43.4 from 43.1. Still the reading was well
Companies reported another fall in new business. Despite the
fall, the reduction in new business was the softest in four months
amid weaker decreases in both manufacturing and services.
Backlogs of work decreased for the eighth straight month and at
a marked pace. The survey showed a decline in employment, which was
the first reduction in nearly three years.
On the price front, the survey revealed that input costs
increased at the fastest pace since May. Services input prices
increased rapidly, while there was a sharp fall in input costs in
Factory output prices decreased for the seventh straight month
as firms passed on cost savings to customers.
Services charge inflation intensified to a three-month high.
Overall output prices posted a solid rise at the composite
Further, companies were moderately optimistic regarding the
outlook for activity over the coming year. However, sentiment was
weaker than the series average.
The overall slowdown in the eurozone was driven in large part by
the two largest economies - Germany and France.
The downturn in the German economy slowed in November as
activity shrank at the slowest rate in four months. The flash
composite output index climbed to 47.1 from 45.9 a month ago.
The services PMI registered 48.7, up from 48.2 in October.
Likewise, the manufacturing measure rose to a six-month high of
42.3 from 40.8 a month ago.
France posted the sharpest reduction in November as output fell
markedly on the back of the steepest decline in new orders in three
years. The flash composite PMI edged down to 44.5 from 44.6.
The services PMI reading was 45.3, slightly higher than
October's score of 45.2. Meanwhile, the manufacturing index slid to
a 42-month low of 42.6 from 42.8 in the previous month.
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