November saw the continued contraction of the euro area manufacturing economy, albeit at the slowest rate for three months.
The IHS Markit Eurozone Manufacturing Purchasing Managers Index (PMI) improved to 46.9 in November, compared to October’s 45.9. Whilst a relative improvement, the PMI nonetheless remained well below the crucial 50.0 no-change mark and extended the current period of contraction to ten months.
Although still signalling a steep rate of decline, the manufacturing PMI nonetheless brings some encouraging signals which will fuel speculation that the worst is over for euro area producers, barring any new set-backs (notably in relation to Brexit and trade wars). In particular, November saw the rate of loss of export sales easing further from July’s recent record, helping pull other indicators such as output, employment, order books and purchasing off their
Perhaps most promising is a marked upturn in business sentiment, particularly in Germany, with optimism about production in the year ahead hitting a five-month high in November. Producers’ renewed optimism in part reflects reduced concerns over trade wars. We nevertheless still need to see a further notable easing in the rate of loss of orders before getting too excited about the prospect of an imminent return to growth for manufacturing.