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 A buoyant Germany was not enough to stop the 17-nation euro zone's
private sector losing momentum in November, dragged backwards by a
downturn in France — the bloc's second biggest economy — and a
continued recession in Italy.
Britain, which does not use the euro, broke a run of upside data
surprises but still provided a strong economic backdrop for a
twice-yearly government budget update due later this week.
Still, the data from across Europe echoed an earlier Chinese survey
that pointed to steady growth in November. Figures due at 10 a.m. ET
are expected to show continued expansion among services firms in the
United States.
"It's steady as she goes, but that's not a bad thing. We can look
forward to 2014 with a lot more optimism than at any time in the
past several years because many of the shoes that we were waiting to
drop haven't," said Peter Dixon at Commerzbank. "It could be better
but it could be a lot worse."
Markit's November Eurozone Composite Purchasing Managers' Index (PMI),
which monitors activity at thousands of firms across both the
services and manufacturing industries, slipped to 51.7 from 51.9 in
October.
That did, however, mark an improvement on an initial estimate of
51.5 and was the fifth straight month above the 50 mark that divides
growth from contraction.
Britain's services PMI fell to a still very strong 60.0, its fifth
highest reading since December 2006 — and all of the better ones
have been since June this year.
In a further indication of strength, China's HSBC/Markit services
PMI stood little changed at 52.5 in November, although a moderation
of new business and prices-charged growth suggests the underlying
momentum has started to soften.
Beijing has embarked on a sweeping restructuring drive and world's
second biggest economy has regained some momentum since mid-year
after a protracted slowdown.
Any positive news will reinforce the government's hand as it pushes
ahead with an ambitious agenda of reshaping the economy to boost
domestic consumption at the expense of the traditional drivers of
exports and investment.
TWO-SPEED EUROPE
The euro zone as a whole escaped from its longest recession earlier
this year, supported by stronger-than-expected growth in Germany.
But a Reuters poll last month said it would grow a paltry 0.2
percent this quarter.
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Markit said its latest data pointed to the same rate of growth but
warned that France's PMI raised the possibility the country would
slide back into recession. The Italy PMI suggested its downturn
would extend into a 10th quarter.
For Germany, Europe's biggest economy, the story was different. The
composite index jumped to a 29-month high as firms took on more
staff to meet the orders flooding in. Spain's service PMI bounced
back comfortably above 50.
"The German economy proves to be — again — the main engine of growth
for the euro zone economy. The massive divergences between the main
euro zone economies remains discouraging," said Annalisa Piazza at
Newedge Strategy.
The growing divergence will complicate the debate at the European
Central Bank when it meets to set policy on Thursday. Last month it
unexpectedly cut its key interest rate to a record low of 0.25
percent after inflation fell close to a four-year low of 0.7 percent
in October.
While inflation picked up slightly last month, it is still well
below the ECB's below-but-close-to 2 percent target ceiling and the
PMI data showed firms are still cutting prices to drum up business.
The euro zone services output price index also showed inflation
pressures easing, dropping to 47.9 from 48.5.
"Although we expect the ECB to keep its remaining monetary powder
dry tomorrow, President Mario Draghi is likely to reaffirm the ECB's
easing bias, for example, by reiterating that the region may
experience a prolonged period of low inflation," said Martin van
Vliet at ING.
[REUTERS MEDIA; By
Jonathan Cable]
(Additional reporting by Jonathan
Standing in Beijing and Christina Fincher in London; editing by Ross
Finley and Jeremy Gaunt)
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