Flash PMI Signals Steep Downturn in November

IHS Markit reports PMI Signals Steep Downturn in November Amid COVID Lockdowns.

Key Findings

  • Flash Eurozone PMI Composite Output Index at 45.1 (50.0 in October). 6-month low. 
  • Flash Eurozone Services PMI Activity Index at 41.3 (46.9 in October). 6-month low. 
  • Flash Eurozone Manufacturing PMI Output Indexat 55.5 (58.4 in October). 4-month low. 
  • Flash Eurozone Manufacturing PMI  at 53.6 (54.8 in October). 3-month low.

The flash IHS Markit Eurozone Composite PMI® slumped from 50.0 in October to 45.1 in November, its lowest since May. With the exceptions of the declines seen in the first two quarters of this year, the average PMI reading of 47.6 in the fourth quarter so far is the lowest since the closing quarter of 2012 (during the region’s debt crisis) and indicative of a steep decline in GDP.  

The deteriorating performance was broad-based, albeit with the service sector hardest hit from virus containment measures. While manufacturing output growth merely slowed in November to the lowest since the start of the sector’s recovery back in July, attributable to a marked slowing in order book growth, service sector output fell for a third month running, with the rate of decline accelerating sharply to the fastest since May.

A near-stalling of manufacturing output growth was exacerbated by an increasingly severe drop in services activity, pushing the flash composite PMI down from 47.2 to 42.4

Employment meanwhile fell across the eurozone as  a whole for a ninth consecutive month, with the rate of job losses holding steady on the post-pandemic low seen in October.

By country, employment rose in Germany for the first time since February, and France saw the lowest number of job losses since the pandemic struck. Job cuts deepened in the rest of the region as a whole, however, to the steepest since June.

Comments From Chris Williamson Markit Chief Economist

  • “The eurozone economy has plunged back into a severe decline in November amid renewed efforts to quash the rising tide of COVID-19 infections. The data add to the likelihood that the euro area will see GDP contract again in the fourth quarter. 
  • “The service sector has once again been the hardest hit, especially consumer-facing and hospitality businesses, though weakened demand has also taken a toll on manufacturing. 
  • “The factory sector nevertheless remains something of a bright spot, with factories in Germany continuing to show especially encouraging resilience, led by a further surge in demand. 
  • “Firms across both manufacturing and services have also become more optimistic about the year ahead, largely reflecting growing hopes that the recent encouraging news on vaccines will allow life to return to normal in the new year. 
  • “Importantly, however, the further downturn of the economy signalled for the fourth quarter represents a major set-back to the region’s health and extends the recovery period. After a 7.4% contraction of GDP in 2020, we are expecting only a 3.7% expansion in 2021.” 

If the Eurozone was not already in recession, this would signal the start of one.

Mish