Growth in Europe Picks Up in Flash PMI Reading

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The markets have seen two weeks of post-election rallying, while U.S. interest rates and the dollar have both been rising in anticipation of a return to growth. Markit has already released stronger-than-expected numbers in the Markit Flash U.S. Manufacturing PMI — and now we are seeing the same or even better for the Eurozone as a whole.

November’s Flash Eurozone PMI composite output index rose to 54.1 in November versus 53.3 in October. This is the best reading all year and makes it an 11-month high. The bulk of Europe’s gain looks more tied to services than some of the mixed readings in manufacturing, but Markit’s report said that the gains were in both sectors.

The Flash Eurozone Services PMI activity index rose to 54.1 in November versus 52.8 in October.

As for why the ties look more to services, the Flash Eurozone Manufacturing PMI output index ticked lower to 54.1 in November versus 54.6 in October. The manufacturing reading was shown to be a two-month low. The overall Flash Eurozone Manufacturing PMI reading of 53.7 for November was versus 53.5 in October, which was actually a 34-month high.

On a major country report basis, Markit said:

  • German service providers reported the fastest expansion since May, but growth slowed in manufacturing.
  • Growth picked up in France to show the second-best expansion over the past year, with both new orders and employment showing the largest gains for almost one-and-a-half years. Services led the expansion, though manufacturing also continued to improve on the back of rising exports.
  • Elsewhere in the Eurozone, growth of business activity accelerated markedly to a ten-month high, with new orders and employment likewise recording stronger rates of increase.

Markit’s November report said:

  • New order inflows also showed the largest monthly improvement since last December, with the rate of growth accelerating for the third month running. The influx of new work helped cause backlogs of uncompleted orders to rise at the fastest rate since May 2011.
  • With firms’ outstanding order book volumes Markit Eurozone PMI and GDP accumulating to the greatest extent in five and a half years, companies took on more staff to help raise operating capacity. Employment growth strengthened for the second month running to reach the joint-highest pace since February 2008.

Data for this Market report were collected between November 11 and November 22, 2016, which means it is all post-election data if the Europeans were looking to the U.S. for reference. The Markit summary said:

The pace of economic growth in the Eurozone accelerated to the fastest so far this year in November. Rising order books meanwhile prompted firms to take on extra staff at the joint fastest rate since early-2008, and prices charged inched higher, indicating that inflationary pressures are at their highest for over five years. The preliminary ‘flash’ Markit Eurozone PMI, based on approximately 85% of final survey replies, rose to 54.1, up from 53.3 in October. The latest reading signaled the strongest monthly increase in output since last December.

Is it possible that Europe could be seeing a better economic picture just like the U.S.? Maybe. Hopefully.