Euro area purchasing managers’ indices continue to fall in November, economy likely to 0.3 pct in Q4

The euro area purchasing managers’ indices continued to decline in November, in contrast to general expectations. The flash manufacturing index dropped to 51.5 from 52. This is the lowest print since May 2016. This shows that the recent lack of dynamism in the economy is not only linked to the issues of the automotive industry with the new emission test procedure. The manufacturing sector also seems to be suffering from weaker global demand, especially from China, noted Commerzbank in a research report.

Nevertheless, the risk of a recession in the euro area is still believed to be low. The IHS Markit purchasing managers’ index for the service sector dropped to 53.1 in November from October’s 53.7. Nevertheless, the index continues to hint at a moderate growth in the euro area economy.

“For the final quarter of 2018, we expect real GDP to grow by 0.3 percent compared with the third quarter. For 2018 as a whole, this means an increase of 1.9 percent” stated Commerzbank.

The continuing extremely expansive monetary policy of the ECB, which is boosting investment and consumption, is the main reason why the euro area economy should not slip into recession. However, the headwind from exports is also likely to ease in 2019.

“Politicians in China have meanwhile taken measures to support the domestic economy. The global industrial sector will also benefit from this”, added Commerzbank.

At 11:00 GMT the FxWirePro's Hourly Strength Index of Euro was highly bearish at -130.026, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 124.093. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex