Euro zone business activity contracts in November, PMI shows
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The Frankfurt-based ECB has lowered borrowing costs three times since June.
PHOTO: REUTERS
BRUSSELS - Business activity in the euro zone contracted for the second time in three months in November, as weak demand saw companies facing challenges securing orders, a closely watched survey showed on Nov 22.
The HCOB Flash Eurozone purchasing managers’ index (PMI) published by S&P Global dropped to 48.1 compared with 50 in October, the most marked rate of contraction in 10 months. Any reading above 50 indicates growth, while a figure below 50 shows contraction.
“Things could hardly have turned out much worse,” said chief economist Cyrus de la Rubia at Hamburg Commercial Bank.
“The euro zone’s manufacturing sector is sinking deeper into recession, and now the services sector is starting to struggle after two months of marginal growth.”
The survey showed that Germany and France, the 20-country single currency area’s two biggest economies, were once again driving the weakness, with the latter posting the fastest fall in activity since January.
Business activity in the euro zone’s services sector also decreased for the first time in 10 months – but the reduction was “only slight” and much weaker than that seen in manufacturing, according to the survey.
The data might tame expectations of another interest rate cut in December after the European Central Bank (ECB) already stepped up the pace of reductions this year.
“We thought that lower inflation and higher wages would boost consumption and demand for services, but that hope has been dashed,” said Dr de la Rubia.
“Some ECB members might even argue for a rate pause in December, but most will probably stick with a 25-basis point rate cut”.
The Frankfurt-based ECB has lowered borrowing costs three times since June.
Meanwhile, euro zone output came in stronger than expected at 0.4 per cent in July-September, but that is still behind the US and China, and experts have warned of slow growth in the months ahead.
“The November PMI is another wake-up call for euro zone policymakers that the economy continues to show signs of weakness,” said Mr Bert Colijn of ING Bank.
“But after the third-quarter gross domestic product figures showed an acceleration, the question is how seriously this signal will be taken”. AFP
