Euro Zone Factory Recovery Faltered In November, Vaccine Hopes Drive Optimism – PMI

LONDON: Euro zone factory growth cooled last month as renewed coronavirus lockdown measures hurt demand, according to a survey which showed Germany remained the driving force behind the bloc’s manufacturing recovery.

IHS Markit’s final Manufacturing Purchasing Managers’ Index (PMI) fell to 53.8 in November from October’s 54.8 but was ahead of the 53.6 flash estimate. Anything above 50 indicates growth.

An index measuring output which feeds into a composite PMI due on Thursday that is seen as a good guide to economic health sank to 55.3 from 58.4.

“Although the rate of expansion cooled from October’s 32-month high amid new lockdown measures, the sustained expansion should help to soften the economic blow of COVID-19 restrictions, which have hit the service sector hard,” said Chris Williamson, chief business economist at IHS Markit.

“The survey therefore adds to evidence the region will avoid in the final quarter of the year a similar scale of downturn recorded in the second quarter.”

While the manufacturing sector continued to expand, an earlier flash reading of the overall survey showed activity in the bloc’s dominant service industry contracted last month as a second wave of the coronavirus swept across Europe.

As most of Europe grapples with a resurgence in infections, the euro zone is on track for its first double-dip recession in nearly a decade, according to a Reuters poll of economists last month. [ECILT/EU]

The PMI showed demand waned and factories cut headcount again last month but optimism did improve amid progress in developing COVID-19 vaccines. The future output index rose to 64.8 from 62.7, its highest since March 2018.

“A brighter outlook is indicated by the upturn in optimism for the year ahead, suggesting the upturn should gather strength again in the coming months as lockdown measures ease and spending, especially investment, picks up in response to the recent news on vaccine development,” Williamson said.

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