Tip: To personalise the research list, click the gear symbol above.

Choose type:

EMU CommentPMI the lowest in more than two years

  1. The October PMI was surprisingly weak
  2. Also weaker service sentiment
  3. Risks on the downside increase
The October PMI was surprisingly weak
The October flash composite PMI index disappointed as it decreased to 52.7 from 54.1 in September. This was much weaker than expected and brought the index to a 25-month low. Hence the index suggests that Q4 activity started out on a weaker footing after a period of stable readings for the past five months (first graph).
Also weaker service sentiment
The decline in PMI was partly due to weaker manufacturing sentiment, as the index here continued this year's decline to a meagre 52.7 in October. The German manufacturing index thus continued its steep decline (to 52.3) while the French index declined to 51.7. We still see the previously stronger EUR as the main explanation for the more sluggish sentiment. Furthermore, a decline in eurozone new export orders to the lowest level in more than five years did not bring about signs of near-term improvement in the manufacturing sector. Additionally, the Service PMI index decreased more than expected in October to the lowest level this year (53.3). This is especially discouraging, as service activity has offset weakness in the manufacturing sector in recent months, but might now take a more negative cue from manufacturing, weaker stock markets and consumer confidence and perhaps the slowdown in the pace of falling unemployment (second graph). This weakens our hope of improving GDP growth in Q4.
Risks on the downside increase
Today’s numbers do not bring much comfort for the ECB, which at the previous policy meeting already saw that risks, while still balanced, had “gained more prominence” on the downside. Combined with the Italian jitters and the risk of a hard Brexit, this must increase speculation about whether the ECB at tomorrow's policy meeting will opt to judge risks as being tilted to the downside. We tend to believe that the ECB will hold back, however, as we have seen little signs of contagion from elevated Italian yields and as some of the weakness in the hard data (retail sales and industrial production) can be explained by temporary factors. But we admit that it is a close call. While uncertainty has risen, we continue to expect the ECB to stick to its “normalisation” plan at tomorrow's meeting.

Source: Macrobond


Source: Macrobond


Rasmus Gudum-Sessingø

Senior Economist


Latest analyses


Morgenmelding Danmark


Morgenmelding Danmark


Morgenmelding Danmark