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PATRIS - MACRO - Key takeaways from November

5 Dec 2018


Bottom-Line: The final reading for the November Markit Eurozone composite PMI showed a 0.3 points upward revision from the preliminary reading to 52.7. This is still the lowest reading since September 2016. The October/November average (52.9) remains well below the 3Q18 level (54.3). As shown by the following chart, the November reading is consistent with a pace of expansion for the economy in the region slightly faster than 3Q18’s 0.2%q/q.

Ireland, France and Spain reached 2-, 3- and 5-month highs, respectively. Germany declined to a 47-month low, while Italy (at 49.3) remained the weakest-performing country.

For the region as a whole, new business volumes in services rose at the slowest rate in over two years. Output charges were again raised at a solid pace, although pricing power remains limited in France, Italy and Spain. Business confidence in the sector deteriorated to its lowest level since August 2016.


Spain: The Markit composite PMI increased by 0.2 points in November to 53.9 (vs. consensus 53.3), on the back of an unchanged reading for the Markit services PMI. At the composite level, the October/November average stands at 53.8, 1.1 points above the 3Q18 average.

The details of the services survey showed a six-month high for the new business sub-index, reflecting stronger domestic demand. New export business deteriorated for a fourth successive month. The employment sub-index remained above the survey’s long-term trend. Companies reported higher fuel, energy and wage costs during the month. The average output price inflation component strengthened to a four-month high in November, although output inflation remains well below that of input costs.

Italy: The Markit/ADACI services PMI rose by 1.1 points in November to 50.3 (vs. consensus 49.3). Therefore, the Markit/ADACI composite PMI remained unchanged at 49.3 on the month, despite the decline posted by the Markit/ADCI manufacturing PMI. The October/November PMI stands at 49.8, after 53.3 in 3Q18. If confirmed by the December reading, this would be the first quarter in contractionary territory since 4Q13.

In the services survey, new orders remained in expansionary territory, although at the lowest level in 45 months, with a number of firms reporting a slowdown in demand. New export business fell in November, though to a lesser degree than in the previous month. New work from foreign customers has declined in five successive months. The employment sub-index rose in November. Input costs rose at a faster pace than in October, while selling prices increased for the first time in ten months. Nevertheless, output inflation remained modest, amid competitive pressures.

Other countries: In Germany, the Markit/BME composite PMI was not revised slightly upwards (+0.1 points to 52.3). The October/November average stands at 52.9, well below the 3Q18 average (55.2). The Markit composite PMI for France was revised upwardly by 0.2 points to 54.2. The October/November average stands at 54.2, slightly below the 3Q18 average (54.4). In Ireland, the composite PMI increased by 0.5 points to 56.6.


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