November Sees Surprise Increase In Eurozone Manufacturing And Services PMIs

The low growth of manufacturing sector in the U.K. was set off by a strengthening of the ‘Euroboom’ as the eurozone manufacturing and services sentiment touched a new six-year year which also helped in pushing up the single currency higher.

While the market and experts had predicted that there would be a slight easing in the preliminary manufacturing purchasing managers’ index for the euro area in November to touch 58.3, the survey from IHS Markit showed in fact showed that the November index had risen to touch 60.0 from 58.5 mark a month before.

On the other hand, the market had also expected a small increase in the Markit’s ‘flash’ services PMI and for it to touch 55.1 from 55.0 recorded a month ago, it increased significantly to touch 56.2.

The eurozone’s composite PMI for the month of October was 56.0 and the combined effect of the two indices helped to push up the overall index to its highest and strongest point since April of 2011 at 57.5, much higher than the market expectations.

In Germany, driven by a manufacturing index that is now at a 79-month peak and a mixed-picture for the services sector where the index remained much above the historical average as well as the average for the third quarter, the German composite PMIs rose from 56.6 in the previous month to clock 57.6 for November which was more than what the markets shad expected.

Similarly, the French composite PMI also sprang a surprised by noting a rise again by 2.8 points and touching the 60.1 which is its highest level since May of 2011. This rise was driven by growth in both the manufacturing and services sectors even as the sentiment for the services sector recording a higher mark compared to the manufacturing sector for the first time since July last year.

The figures impressed by economists at Barclays and the “on fire” eurozone economy: “In our view, there are two main things to highlight in today’s release. First, firms are facing strong operating capacity pressures: new orders are at multi-year highs, and despite firms raising their hiring intentions to record levels, the backlog of works continue to accumulate (the index is at the highest since July 2006) and delivery times lengthen,” it said.

“Second, inflationary pressures are also increasing. Input prices are on the rise due to higher commodity prices, and given the strength of the demand, firms no longer hesitate to favour margins over clients. This pushed selling prices to the highest since June 2011,” the economists said in a note to clients.

Compared to Barclay’s present 0.6% fourth quarter GDP forecast measured quarter-on-quarter, the Barclays’ PMI-based GDP indicator signaled a 0.7% growth for the fourth quarter which also indicated that the eurozone would end 2017 on a strong note.

There has been an average of 1.3 points increase in the services sector, and 0.8 points in the manufacturing sector for Italy, Spain, Ireland and hence the bank expects that sentiment peripheries too have improved, driven by the rise in Germany and France.

(Adapted from Digitallook.com)

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Categories: Economy & Finance, Strategy, Sustainability, Uncategorized

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