The downturn in euro zone business activity eased in November but remained broadbased, suggesting the bloc’s economy will contract again this quarter as consumers continue to rein in spending, a survey showed.
Last quarter the economy contracted 0.1 per cent, official data has shown, and Thursday’s flash Composite Purchasing Managers’ Index (PMI) for November indicated the 20-country currency union is on track to do so again in the fourth quarter.
HCOB’s PMI, compiled by S&P Global and seen as a good guide of overall economic health, ticked up to 47.1 from October’s near three-year low of 46.5 but remained firmly below the 50 mark separating growth from contraction.
A Reuters poll had predicted a more modest lift to 46.9.
“Ongoing weakness in the euro zone business surveys suggests a recession is on the horizon. The manufacturing sector remains in the mire, while services continue to contract,” said Mike Bell at J.P. Morgan Asset Management.
Still, Germany’s downturn showed signs of easing with both manufacturing and services activity falling more slowly than in previous months, raising hopes a recession in Europe’s largest economy might be shallower than expected
France also saw some improvement but business activity contracted again this month – and more than predicted in a Reuters poll – as demand for goods and services in the euro zone’s second-biggest economy deteriorated.
French industry morale was stable in November, official statistics agency INSEE reported earlier on Thursday.
In Britain, outside the European Union, companies reported a marginal return to growth after three months of contraction but the downturn in orders continued in the face of higher interest rates and weak demand.
The overall PMI covering the bloc’s dominant services industry rose to 48.2 this month from 47.8, slightly above the Reuters poll estimate for 48.1.
Demand fell for a fifth straight month, albeit at a slower pace than in October. The new business index rose to 46.7 from 45.6.
Manufacturing activity, which has contracted every month since July 2022, fell again in November. Its PMI rose to 43.8 from 43.1, beating the poll expectation for 43.4 but resolutely below breakeven.
An index measuring output rose to a six-month high of 44.3 from 43.1.
With demand in decline, factories cut back on purchases of raw materials and a chunk of activity was generated by completing old orders. The backlogs of work index came in at 40.1, up from 38.4 but marking its 18th month below 50.
Firms cut headcount for the first time since January 2021 when the continent was enduring COVID-19 restrictions. The composite employment PMI dropped to 49.4 from 50.0.
“This fits into the bigger picture of a labour market weakening on the back of a few quarters of negative growth,” said Bert Colijn at ING.