PMI surveys in the eurozone: further divergence in French and German surveys

The November German manufacturing PMI remains in expansion territory and reached its highest level since June 2011. Meanwhile, on the same measure, France fell further into contraction territory.

The flash eurozone manufacturing PMI (Purchasing Managers’ Index) increased slightly from 51.3 in October to 51.5 in November, in line with consensus expectations. By contrast, the flash eurozone services PMI slipped by 0.7 points to 50.9 in November, weaker than consensus expectations (51.9). As a result, the composite PMI, which is a weighted average of both sectors, declined from 51.9 in October to 51.5 in November, below consensus expectations (52.0), recording a fall for a second consecutive month.

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Widespread decrease in services sector
The rise in the manufacturing sector was broad-based with most components, except for output, posting a monthly increase. In particular, the new export orders subcomponent inched up by 1 point to 54.0, marking its highest level since May 2011 and completely offsetting the two previous months of decline. In the services sectors, the decrease was widespread across components, with business expectations (down 1.7 points) and outstanding business (down 0.6 points) leading the fall.

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Divergent trend between France and Germany
In terms of geographical developments, Germany continued to support the sentiment in the eurozone. The German manufacturing PMI reached its highest level since June 2011 by climbing to 52.5 in November from 51.7 in October, better than consensus expectations (52.0). By contrast, the French manufacturing PMI fell further into contraction territory to 47.8 in November, compared with consensus expectations (49.5). It is worth noting that all components were back in contraction territory. In particular, the new exports order component dropped markedly, highlighting the weakness of the French export sector.

As for the services sectors, the same pattern could be seen, with the German services PMI increasing and the French services sector falling back into contraction territory. All in all, November PMIs highlight the divergent trend between the two largest economies: Germany remains the eurozone’s main driver of growth, whereas France tends to confirm its slip from the core countries towards the periphery.

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Weak Q4 economic activity
These PMIs are consistent with our view of positive but subdued growth. According to November composite PMI, GDP growth in Q4 is likely to remain close to Q3 economic activity.

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