Eurozone Private Sector Contracts At Slower Pace

The euro area private sector contracted at a slower pace in November reflecting a reduced rate of loss of new business, fewer supply constraints and a pick-up in business confidence, flash survey results from S&P Global showed on Wednesday.

The composite output index unexpectedly rose to 47.8 in November from 47.3 in October. The reading was seen at 47.0.

Although the score improved from October, the reading remained below the neutral 50.0 threshold that separates growth from contraction for the fifth straight month.

The data for the fourth quarter remains consistent with gross domestic product contracting at a quarterly rate of just over 0.2 percent, Chris Williamson, chief business economist at S&P Global Market Intelligence said.

A recession looks likely but the latest data provide hope that the scale of the downturn may not be as severe as previously feared, Williamson added.

Manufacturing continued to lead the downturn, with factory output dropping for a sixth consecutive month. Service sector output also continued to fall albeit at an unchanged pace.

The manufacturing Purchasing Managers’ Index posted 47.3 in November, up from 46.4 a month ago and the expected level of 46.0. At the same time, the services PMI remained unchanged at 48.6, and above economists’ forecast of 48.0.

The survey showed that new orders dropped for the fifth month in a row with the latest decrease being the second-largest in the last two years. Further, there was a slowdown in hiring in the service sector and factory payroll growth remained subdued.

One positive consequence of weaker demand was a marked reduction in supply chain delays.

At composite level, input cost inflation cooled to the lowest since September 2021 and average prices charged for goods and services also rose at a reduced rate.

Finally, business expectations for the year ahead remained subdued, improving slightly for a second successive month.

Within the euro area, Germany again reported the steepest downturn. The composite output index registered 46.4, up from October’s 45.1 and hit the highest level since August. The expected score was 44.9.

The services PMI dropped marginally to 46.4 from 46.5 a month ago. The index was forecast to fall to 46.2.

On the other hand, the manufacturing PMI rose to 46.7 from 45.1 in the previous month and was above economists’ forecast of 45.0.

Meanwhile, the French private sector contracted for the first time since February 2021. The composite PMI came in at a 21-month low of 48.8 versus 50.2 in October. The score was forecast to fall moderately to 49.5.

At 49.4, the services PMI hit a 20-month low in November against 51.7 in the prior month. The expected score was 50.6. The manufacturing PMI unexpectedly advanced to a three-month high of 49.1 from 47.2. The expected score was 47.0.

Output fell in the rest of the eurozone for a third month in a row, albeit with November’s decline being the smallest seen over this sequence, the survey showed.

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