Weak Euro PMI’s Raise Doubts of Economic Recovery

Euro economy PMI
source: pixabay

A series of weak PMI data releases from the UK, Germany and the Eurozone raised concerns over the economic recovery.

UK PMI Plummets

An early “flash” reading of the IHS Markit/CIPS UK Composite Purchasing Managers’ Index (PMI), a gauge of private sector growth, saw the reading plummet to a five-month low of 47.4 in November.

The sizeable fall from October’s 52.1 reading was attributed to a new wave of coronavirus restrictions hitting the service and hospitality industry.

Importantly, it is the first time the index fell below the all-important 50.0 reading since June. Readings above 50 signal growth whilst below 50 signals contraction. However, November’s reading was better than analysts had forecast, with a slump to 42.5 forecast in a Reuters poll of economists.

Germany PMI Declines

It is a similar story in Germany, as a new wave of restrictions recently introduced, heled push services PMI lower in the largest economy in the European Union.

IHS Markit’s flash services Purchasing Managers’ Index (PMI) dropped to 46.2 in November, down from the 49.5 recorded in October.

November’s figure was actually slightly worse than analysts predicted. A Reuters poll had forecast a decline to 46.3.

Euro Zone PMI in Big Fall

Business activity in the Euro Zone contracted sharply in November as fresh lockdowns forced many company’s in the European bloc’s dominant service industry to temporarily close.

IHS Markit’s headline flash composite PMI, viewed as a reliable guide to economic health, dropped to 45.1 this month, down from October’s 50.0 reading – the exact level separating contraction from growth.

The figures were worse than expected after a Reuters poll had forecast a smaller decline to a reading of 46.1.