MNI 5 Things: Euro Area Struggles To Manufacture Q4 Recovery

By Jai Lakhani

     LONDON (MNI) - The Euro Area composite PMI dropped to 52.4 in November,

coming after October saw a 1-point fall to 53.1. This was unlikely to be the

outcome markets were looking for, with the MNI median at 53.0. 

     Here are five things worth noting from the release.

     --Euro Area Business Activity Markedly Weak: The weakness in the composite

PMI came from business activity dropping to a near 4-year low, most notably in

manufacturing. Anecdotal evidence from manufacturers was subdued global demand,

rising political and economic uncertainty, trade wars and especially sluggish

car sales. The drop in global demand has been noted previously in MNI analysis.

     --Germany's Grim Readings Did Little To Help: Germany extended an unwanted

streak of a falling composite PMI reading to three months, dropping to 52.2, a

47-month low. What is more concerning from this is the fall stemmed from

manufacturing dropping to a 32-month low at 51.6. This suggests the recovery

from September's car emission problems still has a lot further to go.

     --France Manufacturing Close To 50.0 Mark: The fall in manufacturing in

Germany was mirrored in France. However, the fall in France was more noteworthy

given the reading of 50.7 in November suggests the manufacturing sector in

France is significantly closer to contractionary territory.

     --Q3 Could Be More Than Just A Blip: The drop in the composite PMI,

originating from the continued weakness in manufacturing suggests that the

weakness in Q3 may not be a temporary phenomenon. As Chris Williamson, Chief

Business Economist at IHS Markit said "Manufacturing remains the main area of

weakness, linked in part to having been hit hard once again by deteriorating

exports... As such, the survey data suggest that the weakness of GDP in the

third quarter may not have been a blip, and that the underlying trend is one of

slower economic growth."

     --ECB Faces Dilemma: The drop in Q4 provides question for the ECB when they

meet in December. This is more so given expectations of a modest recovery in the

Euro Area after a rather disappointing Q3.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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