Euro area PMIs indicate stable growth above trend

Oct 26, 2015

The Euro-area PMIs came in solid, signalling continued strength in the service sector and no additional weakness in the more export-exposed manufacturing sector. For the short-term, the numbers indicate ongoing growth that is moderate by international standards but still above the Euro-area trend. The subdued development in manufacturing lends some support to (not only the ECB's) worries about slower growth of emerging economies.

Euro-area composite PMI rose to 54.0 (from 53.6), beating expectations (Forecast: 53.5, consensus: 53.4). The service component rose, while manufacturing remained stable after three declines in a row. The level of PMIs is still higher in Germany than in France. However, due to the much higher share of German exports to Emerging Markets, the German economy faces a greater risk of slowdown. New orders in German manufacturing declined, but we have seen much weaker numbers last summer.

"We plugged the October composite PMI for the Euro area as the Q4 value into a regression model that we use for short-term GDP forecasts. Our model forecasts growth of 0.4% q/q in Q3 and Q4. So above-trend growth looks set to continue, at least in the short term",says Nordea Bank.

"The subdued trend in manufacturing lends some support to the ECB's worries about slower growth of emerging economies. After ECB President Draghi's dovish message yesterday.We consider an easing package including more and longer QE and also a 10 bp cut in the deposit rate likely in the December meeting", added Nordea Bank.

Source: EconoTimes