Eurozone Private Sector Slowdown Continues

The euro area private sector downturn continued in November with the sustained decline in new business signaling a shallow recession in the region towards the end of the year.

The HCOB composite output index registered 47.6, up from a 35-month low of 46.5 in October, the purchasing managers’ survey results from S&P Global revealed on Tuesday.

Moreover, the score was also above the flash level of 47.1 and hit the highest since July.

The services Purchasing Managers’ Index advanced to 48.7 from 47.8 in the previous month. The flash reading was 48.2.

Factoring in the latest PMI indicators, GDP nowcast suggests that a fall in GDP is on the cards for the fourth quarter and the economy is on the brink of recession, Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, said.

Demand for goods and services remained a major drag on business activity. Orders from non-domestic clients faltered after orders received from external sources declined sharply.

Falling receipts of new work prompted companies to make additional inroads into their backlogs. Outstanding orders across the private sector declined strongly.

Further, employment decreased for the first time in nearly three years. The drop exclusively reflected job losses at manufacturers as services companies registered a slower expansion in staffing capacity.

There was a slight intensification of price pressures.

Input prices grew sharply and at the joint-fastest pace since May. While manufacturers’ expenses continued to fall, input cost in the service sector declined.

Consequently, output charge inflation ticked up in November.

Growth expectations edged up slightly in November and the positive sentiment was subdued by historical standards.

“The ECB confronts a pivotal decision: continue with interest rate hikes or place faith in the ongoing transmission of these hikes to prices,” HCOB’s chief economist Rubia said.

“As of now, indications suggest a strong bias towards the latter choice,”

All big four economies of the currency bloc reported contractions in November.

France was the worst performer. Germany and Italy reported a slowdown in their downturns, while Spain’s private sector shrank for the first time since August.

Germany’s final composite output index advanced to 47.8 in November from 45.9 in October. The score suggested the slowest pace of contraction in four months.

The German services PMI posted 49.6, up from 48.2 in October and the initial score of 48.7.

France’s private sector shrank again in November. The composite output index held steady at 44.6 compared to the flash estimate of 44.5.

The services PMI rose slightly to 45.4 from 45.2 a month ago and remained slightly below the initial estimate of 45.3.

With sustained contractions in both manufacturing and services output, Italy’s private sector registered a sixth straight month of contraction.

But the composite indicator improved to 48.1 from 47.0 in October. The services PMI picked up to 49.5 in November from October’s year-low of 47.7.

Spain’s private sector shrank for the first time in three months in November.

The composite index dropped to 49.8 in November from 50.0 a month ago. The services PMI registered 51.0, little changed from 51.1 in the prior month.

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