Eurozone PMIs (Nov)

Employment slowing, inflation growing.

The eurozone PMIs bounced back a bit in November but still signalled contraction.The composite employment index dipped below 50 for the first time since the pandemic.While there was a re-acceleration in both input and output price inflation, reflecting wage pressure in the service sector.FactsIn November, the eurozone composite PMI increased from 46.5 to 47.1, surpassing the consensus of 46.8. Following a disappointing October, the headline index now hovers just below the September level, though it remains in contractionary territory. Notably, both manufacturing and services PMIs experienced upticks.

Within eurozone services, the activity index climbed from 47.8 to 48.2, slightly exceeding the consensus of 48.1. This improvement was accompanied by increases in new business and new export orders, the latter surging by 2.8 points. However, there was a slight dip in future business expectations.

Euro PMIs

Source: Finlogix Calendar

The eurozone manufacturing PMI rose from 43.1 to 43.8, reflecting a rebound in new orders, reaching a six-month high (though still below the 50 threshold). Despite ongoing contraction, the pace slowed as the index rose by 1.2 points. Conversely, employment in the manufacturing sector deepened its contraction, falling by 0.7 points.

Several pricing indices in the eurozone exhibited an upward trend. While there was a decline in the manufacturing input price index, both the composite and services indices reported increased input cost inflation, with the former reaching a six-month high.

In November, the French composite PMI remained relatively stable at 44.5, only a slight decrease from the previous month's 44.6, indicating a continued significant deviation from the neutral threshold of 50. Similarly, the Services PMI showed marginal change, shifting from 45.2 to 45.3. However, forward-looking indicators such as future activity and new business slightly declined, both lingering below the 50 marks. The Manufacturing PMI experienced a slight dip from 42.8 to 42.6, marking its third consecutive decline, and the output index reached its lowest point since May 2020.

Reflecting the broader eurozone trend, the employment component of the French PMI fell below 50 for the first time since November 2020, although it remained slightly above 50 in services. Pricing components displayed mixed signals, with the composite input price index decreasing while output price inflation saw a slight increase.

Additionally, the INSEE French business confidence, released concurrently, indicated a less pessimistic outlook compared to the PMIs. It decreased by 1 point to 97 in November, following a 2-point drop in October, remaining below the long-term average of 100 for the second consecutive month. The employment index also continued to decline, aligning with the negative signal from the PMIs.

In Germany, the flash manufacturing PMI exceeded expectations by rising from 40.8 to 42.3 due to somewhat less contractionary orders. The output index improved to its best level in six months but remained in contractionary territory. However, manufacturing firms increased employee layoffs at an accelerated pace, with the employment component reaching its lowest point since October 2020. Input prices fell to a three-month low, while output prices experienced a less pronounced decline in November.

Simultaneously, the German flash services PMI increased by 0.5 to 48.7, aligning with expectations and slightly surpassing the Bloomberg consensus of 48.5. Despite a slight decrease in the future activity index after a robust October, it remained comfortably in expansionary territory. New orders improved to the best since June, indicating a reduction in contraction on the demand side. The employment index picked up slightly, suggesting stable staffing levels. Input costs rose at an accelerated pace, reaching the highest level since May 2023, while the pickup in output price momentum was less pronounced in November.

For the eurozone, excluding Germany and France, the composite output index rose by 0.5 points to 48.8, with services crossing the 50 thresholds (from 49.4 in October to 50.1).

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