• Prior 48.6
  • Manufacturing PMI 47.3 vs 46.0 expected
  • Prior 46.4
  • Composite PMI 47.8 vs 47.0 expected
  • Prior 47.3

The euro area contraction eased slightly in November, as price pressures cooled. That said, business sentiment remains gloomy and demand conditions are still largely subdued. The only positive is that cost pressures fell to their lowest in 14 months, but rates of inflation are still elevated relative to historical standards. S&P Global notes that:

“A further fall in business activity in November adds to the chances of the eurozone economy slipping into recession. So far, the data for the fourth quarter are consistent with GDP contracting at a quarterly rate of just over 0.2%.

“However, the November PMI data also bring some tentative good news. In particular, the overall rate of decline has eased compared to October. Most encouragingly, supply constraints are showing signs of easing, with supplier performance even improving in the region’s manufacturing heartland of Germany. Warm weather has also allayed some of the fears over energy shortages in the winter months.

“Price pressures, the recent surge of which has prompted further policy tightening from the ECB, are also now showing signs of cooling, most noticeably in the manufacturing sector. Not only should this help contain the cost of living crisis to some extent, but the brighter inflation outlook should take some pressure off the need for further aggressive policy tightening.

“However, it’s clear that manufacturing remains in a worryingly severe downturn, and service sector activity is also still under intense pressure, both largely as a result of the cost of living crisis and recent tightening of financial conditions. A recession therefore looks likely, though the latest data provide hope that the scale of the downturn may not be as severe as previously feared.”