Eurozone November growth is surprisingly strong but the outlook is bleak: PMI


London-Eurozone business growth has accelerated unexpectedly this month, but another wave of coronavirus infections and new restrictions, along with price pressure, are likely to hurt December’s expansion, according to a survey on Tuesday. Showed.

IHS Markit’s Flash Composite Purchasing Managers’ Index, a good indicator of overall economic conditions, surged from 54.2 in October to 55.8 in November.

This exceeded all predictions from Reuters polls that had predicted a decline to 53.2. Anything over 50 shows growth.

“The flash PMI in November was surprised by the rise in the euro area, France and Germany,” said Rory Fennessey of Oxford Economics.

“But in some eurozone countries, cases are skyrocketing, and the short-term outlook is rapidly becoming pessimistic as the risk of another dangerous wave of coronavirus increases. Emotions are likely to get worse. “

Growth in Germany’s private sector has accelerated slightly, but previous data show that sustainable supply bottlenecks in manufacturing continued to weigh on factory output, pushing inflationary pressures to unprecedented highs. rice field.

France’s business activity also expanded faster than expected, with initial estimates showing that the service sector, the second largest economy in the euro area, grew fastest in almost four years.

However, European stocks fell to their lowest in three weeks on Tuesday as the resurgence of COVID-19 cases and fears of a rate hike hit emotions.

Federal Reserve Chairman Jerome Powell’s nomination boosts bets on US rate hikes in 2022, with UK companies accelerating new orders growth since June, alongside record cost pressures Reported and probably paved the way for the Bank of England’s rate hike in December.

Bank of England
A person who passed the Bank of England in the financial district of the City of London in London, England, on June 11, 2021. (Henry Nichols / Reuters)

The BoE will be the first major central bank to raise interest rates, a split economist investigated by Reuters earlier this month, whether the first hike will come soon next month or until early next year.

Price pressure

The pandemic supply bottleneck has made it a seller’s market for raw materials, and the combined input price index has skyrocketed from 73.2 to 75.9, much higher since the survey began in mid-1998.

Still, the PMI of Block’s dominant service industry rose from 54.6 to 56.6. This is well above all Reuters polls that we predicted would drop to 53.5.

However, optimism has diminished as new blockades are likely to have a significant impact on services. The business sentiment index fell from 69.0 to 66.6, the lowest since February.

Manufacturing activity remained strong, with factory PMI rising from 58.3 to 58.6. The exponential measurement output supplied to the composite PMI has increased from 53.3 to 53.8.

Demand remained strong and the plant was able to pass on some of the record increases in raw material costs to its customers. The price index jumped from 72.6 to 74.3, the highest since IHS Markit started collecting data 19 years ago.

Jessica Hinds of Capital Economics said:

Headquarters of the European Central Bank (ECB) in Frankfurt, Germany, March 12, 2016. (KaiPfaffenbach / Reuters)

PMI casts doubt on the European Central Bank’s claim that rising inflation is temporary. Eurozone inflation expectations are at risk of continuing to exceed the World Bank’s 2% target next year, according to a Reuters poll earlier this month.

ECB board member Isabel Schnabel told Bloomberg in an interview that inflation in the euro area will be higher than previously thought next year, leaving inflation above the World Bank’s target in the medium term. He said there was a risk of becoming.

Jonathan Cable