Euro area economic growth continues to decelerate in November, services PMI index drops to 53.4

Euro area economic growth continued to decelerate in November. The final IHS Markit Eurozone PMI Services Business Activity Index dropped a bit in November to 53.4 from October’s 53.7. This is the lowest reading seen in over two years. The deceleration of growth was mainly centred on Germany, where activity rose at its softest rate since May. France continued to see a marked rise in activity, whilst Spain saw growth hold stable at a strong level. Activity in Italy rose a bit after October’s contraction.

New business volumes also rose at the slowest rate in more than two years but at a sufficiently solid enough degree to generate another rise in work outstanding. Backlogs rose modestly and have risen throughout the last two-and-a-half years. Increasing workloads subsequently encouraged further job creation, with growth in staffing levels staying strong in spite easing to a six-month low. The sharpest rises in employment were again seen in Germany and Ireland, which also seen the strongest rises in input costs in the midst evidence of higher wages being paid.

With energy and fuel costs also recorded to be higher, overall input prices in the euro area service sector continued to increase at an elevated rate. In response, output charges were again raised at a strong rate although limited pricing power in France, Italy and Spain served to restrict overall inflation. Finally, business sentiment dropped to its lowest level since August 2016. Optimism regarding the future was at its lowest level for two years in France and Germany.

At 16:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at -7.18687, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 62.8902. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex