Euro area flash purchasing managers’ indices disappoint in October

Euro area’s purchasing managers’ indices disappointed in October. The flash manufacturing PMI index dropped 1.1 points to 52.1 in the month, the lowest since May 2016. Meanwhile the index for services sector dropped 1.4 points to 53.3. This lowers the hope that the subdued economic growth in the summer is only an outlier, noted Commerzbank in a research report.

The data available so far suggests that the real GDP growth of euro area came in at just 0.2 percent in the third quarter on a sequential basis. This might have halved the rate of growth compared with the first half of the year. The main reason for the setback is the development in Germany, where the economic growth is expected to have come to a standstill in the summer, where the automotive industry has major issues with the certification of vehicles according to the new emission test procedure. The associated production losses left deep traces on industrial production. Nevertheless, these issues should be greatly resolved in the fourth quarter and the German economy might again add to the economic growth in the euro area, stated Commerzbank.

Nevertheless, it is not clear whether the euro area economy will actually be able to resume the rate of growth of the first half of 2018 in the autumn, given the considerable fall in the PMIs in October. The slight upward trend in the Services PMI was abruptly halted in October. The index dropped 1.4 points to a new year-low of 53.3. Moreover, the continued fall in manufacturing PMI indicates that the problems in industry might be more than persistent than expected.

At 13:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at -25.937, while the FxWirePro's Hourly Strength Index of US Dollar was bullish at 92.2526. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex