Friday night saw the December Flash PMI data for the Eurozone and the results were mixed. Chris Williamson, Chief Economist at Markit, summed it up:
The eurozone downturn showed further signs of easing in December, adding to hopes that the outlook for next year is brightening. It looks like the downturn reached its fiercest back in October, since when the PMI has turned up steadily by no means spectacularly.
The survey is still consistent with euro area GDP falling for the third successive quarter and, as the official data lag the PMI, the downturn is likely to have steepened compared with the 0.1% decline seen in the third quarter. However, a return to growth is looking like an increasing possibility in the first half of next year, barring any surprises, if the recent improvements in the survey data can be sustained.
The turnaround is being led by Germany, for which the PMI has already returned to positive territory. However, the rates of decline in France and the rest of the region remain worryingly severe.
So it appears the rate of decline across the eurozone has slowed, but in much of the area economy is still contracting quite steeply. Manufacturing across the zone is still contracting, including in Germany, but a big jump in German services pushed their composite index into positive territory. Overall this news isn’t as bad as it could be, but as I have been saying over the last month a new rounds of fiscal tightening awaits many countries in 2013. I also note that the latest credit data from the ECB doesn’t show the same uptick as we’re seeing in the PMI data so I’m not quite as optimistic as Mr Williamson about the outlook for the new year.
There does, however, appear to be a bit of renewed optimism in global growth and as long as the US can avoid its own fiscal issues I would expect to see manufacturing expansion to come back in non-euro exposed economies. Unfortunately that doesn’t include most of the economies that are currently struggling, and you will note that both the French and Eurozone reports includes the following:
The rate of decline of new business also moderated, slowing for the third month in a row. The easing was only very marginal, however, indicating that companies continued to face steeply deteriorating demand for goods and services.
This continued contraction is also still seeing job shedding everywhere but Germany which again is likely to lower future demand for goods and services in those affected nations.
Reports below: