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Eurozone PMI In Steepest Decline Since 2009!

  • Written by Syndicated Publisher No Comments Comments
    November 24, 2012

    With the markets giddy over the ‘success’ of people spending more money than they can afford on gifts that make little practical sense, other inquiring minds note the Markit Flash Eurozone PMI® shows Eurozone sees ongoing steep decline as services suffers worst month since mid-2009.

     Key Points

    Flash Eurozone PMI Composite Output Index at 45.8 (45.7 in October). Two-month high.
    Flash Eurozone Services PMI Activity Index at 45.7 (46.0 in October). 40-month low.
    Flash Eurozone Manufacturing PMI at 46.2 (45.4 in October). Eight-month high.
    Flash Eurozone Manufacturing PMI Output Index at 45.9 (45.0 in October). Two-month high.

    The Markit Eurozone PMI® Composite Output Index was little-changed in November according the flash estimate, up fractionally from 45.7 in October to 45.8. October’s reading had been the lowest since June 2009 and, for the fourth quarter of 2012 so far, PMI data suggest the strongest contraction of output since the second quarter of

    PMI vs. GDP


    Activity has now fallen in 14 of the last 15 months, with the exception being a marginal increase seen in January. Output fell sharply in both the manufacturing and service sectors and, while the former saw the rate of contraction ease slightly, the latter saw business activity fall at a rate not seen since July 2009.

    The ongoing drop in output reflected a further steep deterioration in new business, which fell at one of the fastest rates seen since mid-2009. A sharper
    rate of decline in the services sector was partly offset by manufacturers reporting that their rate of loss of new orders had eased slightly to the weakest for eight months.

    The plight of the service sector was also highlighted by companies’ expectations for activity in the year ahead dropping to the lowest since March 2009. Sentiment dropped especially sharply in Germany, but improved slightly in France.

    Forward-looking indicators in the manufacturing sector also pointed to ongoing weakness in the coming months. The amount of goods purchased for use in production fell steeply, causing stocks of purchases to contract at the same pace as the
    near-three year record seen in October.

    Service Activity Plunges in Germany

    The Markit Flash Germany PMI® shows Sharpest fall in services activity for almost three-and-a-half years, but manufacturing downturn eases in November.

     Key Points

    Flash Germany Composite Output Index(1) at 47.9 (47.7 in October), 2-month high.
    Flash Germany Services Activity Index(2) at 48.0 (48.4 in October), 41-month low.
    Flash Germany Manufacturing PMI(3) at 46.8 (46.0 in October), 2-month high.
    Flash Germany Manufacturing Output Index(4) at 47.7 (46.3 in October), 2-month high.


    November data indicated that the combined output of the German private sector dropped at a broadly similar pace to that seen in the previous month. However, this masked divergent trends in the performance of the manufacturing and service sectors, with the former posting a slower drop in output compared with October while the latter registered its fastest contraction since June 2009.

    Another overall reduction in German private sector output reflected an ongoing contraction in new business volumes. Lower levels of new work have now been recorded in 15 of the past 16 months. Manufacturers and service providers indicated broadly similar rates of decline but, as with output, there was a divergence in momentum compared with that seen in October. Service providers posted the steepest decline in new business for three months, while the drop at manufacturers was the slowest since March. The latest drop in new export orders received by manufacturers was the least marked for six months, which some firms linked to support from stronger demand in China.

    Shrinking new business volumes in the service sector contributed to a steep drop in expectations for activity over the next 12 months. The index measuring service providers’ business expectations was the lowest since March 2009.

    German private sector employment dropped at the sharpest pace since January 2010. A softer fall in manufacturing staffing levels was offset by the most marked decrease in services jobs for three-and-a-half years. Meanwhile, backlogs of work in the German private sector dipped for the seventeenth successive month in November, suggesting an ongoing lack of pressure on operating capacity.


    Commenting on the Markit Flash Germany PMI® survey data, Tim Moore, Senior Economist at Markit said:

    “The picture emerging from November’s survey is that the Germany economy will end the year with a whimper rather than a bang, as troubles in the eurozone continue to weigh on domestic business and consumer confidence. … November’s survey suggests that the near-term outlook remains bleak for both manufacturers and service providers. Stocks of purchases across the manufacturing sector, which can be a useful barometer of confidence in the demand outlook, dropped at the steepest pace for three years – despite a slower fall in new work. Meanwhile, in the service economy, the year-ahead outlook was reported as the weakest since March 2009. The survey panel noted widespread worries that client budgets will be cut in 2013, alongside expectations that the euro area crisis will further undermine the German recovery.”

    Mike “Mish” Shedlock

    Images: Flickr (licence attribution)

    About The Author

    Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.  Visit Sitka Pacific’s Account Management Page to learn more about wealth management and capital preservation strategies of Sitka Pacific.

    You are currently viewing my global economics blog which typically has commentary every day of the week. I am also a contributing “professor” on Minyanville, a community site focused on economic and financial education.  Every Thursday I do a podcast on HoweStreet and on an ad hoc basis contribute to many other sites.

    When not writing about stocks or the economy I spend a great deal of time on photography and in the garden. I have over 80 magazine and book cover credits. Some of my Wisconsin and gardening images can be seen at MichaelShedlock.com.