Euro Zone Private Sector Activity Slows in November

Private sector activity in the eurozone experienced a slowdown in November, as highlighted by data released by Markit. This decline raises concerns about the economic outlook for the region, particularly following recent data that indicated growth had slowed in the third quarter.

The manufacturing purchasing managers’ index (PMI) for the eurozone rose slightly to 51.5 in November, up from a final reading of 51.3 in October. Conversely, the services PMI fell to 50.9 this month from 51.6 in October, falling short of expectations for a rise to 51.9.

Chris Williamson, chief economist at Markit, commented on the situation, stating, “The average reading over the fourth quarter so far is signaling a very modest 0.2% expansion of GDP across the region, and it looks like momentum is being lost again.” He further noted that the consecutive decline in the PMI suggests that the European Central Bank (ECB) made the right decision in cutting interest rates to a record low during its last meeting. He indicated that the continued loss of growth momentum may prompt policymakers to take additional measures to avert a potential recession in the eurozone.

Earlier this month, the ECB surprised markets by unexpectedly reducing rates to a record low of 0.25% due to rising concerns about deflationary pressures within the euro area. As Williamson pointed out, all eyes are now on the emerging signs of these deflationary forces.

In terms of performance by country, Germany’s manufacturing PMI surged to a 29-month high of 52.5 in November, up from 51.7 in October, while its services PMI also improved, reaching a nine-month high of 54.5 compared to 52.9. However, data from France painted a less optimistic picture, as activity in the eurozone’s second-largest economy contracted for the first time in three months. The French manufacturing PMI dropped to a six-month low of 47.8 from 49.1, and the services PMI fell unexpectedly to a four-month low of 48.8 from 50.9.

Additionally, Eurostat reported last week that eurozone GDP grew by just 0.1% in the third quarter, a slowdown from the 0.3% growth recorded in the second quarter when the eurozone emerged from recession.