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Eurozone Composite PMI Surges To 54 Month High Even As ECB Prepares To Launch More QE To "Boost Economy"
With the ECB expected to announce a boost to QE and pushing rates even lower into record negative territory, perhaps Markit did not get the memo to double seasonally adjust the seasonally adjusted European manufacturing and services PMI survey data, when instead of providing cover for Draghi ("look, the economy is slowing down even more, surely you must unleash more printing") it reported that not only the Manufacturing PMI rose to 52.8 from 52.3, a 19 month high and above the highest estimate (range was 51.5 to 52.6), not only the Service PMI rose to 54.6 from 54.1, a 54 month high and also above the highest estimate (range of 53.5-54.4), but the Composite PMI soared to the highest level recorded since May 2011, rising from 53.9 to 54.4 (which was also above the highest estimate).
Who drove the surge - mostly Germany, which also beat all three surveys across the board, making one wonder just which country the Volkswagen scandal was based in.
From the report:
Eurozone businesses reported the fastest rates of growth in business activity and employment for four-and-a-half years in November. The Markit Eurozone PMI® rose from 53.9 in October to 54.4, according to the preliminary ‘flash’ reading, indicating the fastest rate of expansion of output since May 2011. Moreover, the survey’s employment, new orders and backlogs of work indicators all signalled the strongest monthly expansions in four-and-a-half years.
The survey data also highlighted the broad-based nature of the upturn. The recovery continued to be led by the service sector, where business activity and new business rose at the fastest rates since May 2011 and employment showed the biggest monthly gain for five years. Manufacturing output growth meanwhile also gathered pace, reaching a three-month high amid the largest monthly improvement in order books since April of last year. Factory headcounts also rose at a faster rate as firms raised capacity in line with the improved demand environment.
One area of weakness was France, where business activity rose at the slowest rate for three months, largely reflecting weaker service sector growth. Manufacturing output growth also slowed despite a slightly faster rise in new orders.
Growth meanwhile accelerated to a three-month high in Germany, fuelled by the biggest monthly improvement in new business for two years. Stronger gains in business activity and new orders in the service sector were partly offset, however, by a slowdown in manufacturing. An upturn in job creation was reported across both sectors, nevertheless, resulting in the largest jump in overall employment for nearly four years.
The strongest rate of expansion was seen outside of the eurozone’s two largest economies, where the survey recorded the second-steepest rise in output since the global financial crisis. Employment in the rest of the currency bloc meanwhile showed the joint-largest gain since July 2007.
Despite the upturn in the pace of growth and hiring, the survey showed ongoing deflationary pressures. Average prices charged for goods and services fell marginally, at a rate unchanged on October, while average input costs once again barely rose, linked primarily to falling global commodity prices.
How does one reconcile this seemingly resurgent economy with Draghi's most recent comments that he is disappointed in Europe's growth rate? Apparently Markit got the wrong memo on what message it was supposed to convey. Here is Chris Williamson, Chief Economist at Markit said:
“The PMI shows a welcome acceleration of eurozone growth, putting the region on course for one of its best quarterly performances over the past four-and-a-half years. The data are signalling GDP growth of 0.4% in the closing quarter of the year, with 0.5% in sight if we get even just a modest uptick in December.
“The improved performance in terms of economic growth and job creation seen in November are all the more impressive given last weekend’s tragic events in Paris, which subdued economic activity in France – especially in the service sector.
“However, with recent comments from ECB chief Mario Draghi highlighting how the central bank remains disappointed with the strength of the upturn at this stage of the recovery, November’s slightly improved PMI reading will no doubt do little to dissuade policymakers that more needs to be done at their December meeting to ensure stronger and more sustainable growth.”
In other words Europe's central bank, like the Fed, may be data driven, but not by good data when it has already made up its mind to boost stimulus. Expect a dramatic slowdown in PMIs over the coming months to provide much needed cover for continued European currency debasement.
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This is very easy to explain. All those Invaders need Shelter and Food and where does it come from?
They arrive with wads of 500 Euro bank notes which Europeans never really use. So it has to be state sponsored somehow.
I'm sure Ghordius is cheering.
Looks it's all those refugees already adding to GDP!
I'm pretty sure the weak euro has everything to do with it. Soon we'll be at par with the dollar for god sake!
It was 1.35 a while ago and now it's sitting at 1.06!!!!
Gold and silver aren't doing that bad in euro's either!
And I'm pretty sure that 2015 inflation numbers will be way to high also.
It's what the central banks want but not exactly what the people want because no way are wages keeping up with the decline in the euro value.
I just looks more like the pre weimar golden years then anything else!
I don't understand this deflationary theme. Every piece of european machinery I have priced has gone up considerably in the last four years. With the Euro falling and material prices falling, this does not make sense. We should see both Euro and Japanese imports considerably lower in price...buy they are not.
With the Euro grinding ever lower, Europeans are not really profiting off cheap Gold and Oil prices. With oil low enough to keep overall inflation numbers low and Draghi printing, rents and housing have inflated 4%+ y/y, stocks are soaring as we all know (how does this not qualify as massive inflation?), food and restaurants at 8%+ inflation, in fact I think the only thing getting cheaper is credit.
Draghi is taking Europe for a ride, while Europeans are busy being scared of terrrrist. The tower of babylon is already standing.
The ECB’s “double seasonally adjusted” manufacturing and services PMI survey “data” are about as credible as US Dept of Labor’s employment statistics or State Department/Pentagons anti-ISIS policy. As readers of ZH or David Stockman's Contra Corner (davidstockmanscontracorner.com) are well aware, the current state of the world economy is bleak- 1) World trade along with commodity prices have collapsed, causing severe economic dislocation in EMs; 2) Western economies- US, EU and Japan face daunting economic challenges- stagnant declining economies characterized by sclerotic manufacturing bases, high unemployment coupled with anemic job growth (>90% on “new” jobs in the US are temp positions- low pay, no benefits or job security), increasing austerity, poverty and deficits; 3) A number of countries in the EU (the other “Greeces”) are teetering on economic collapse- Portugal, Italy, Spain and France; 4) The US/NATO/GCCs multi- $-trillion (taxpayer funded) war theater extends from the Levant, to Caspian Basin, Persian Gulf, China Sea, Indian Ocean, Horn of Africa, the Maghreb, to Eastern Europe and Russian border. The response of Western countries to this economic catastrophe has been for Central Banks (US FED, ECB and BOJ) to flood private banks with ultra-cheap money (aka QE; supplied by taxpayers) which has inflated assets- stocks (facilitate corporate stock buybacks) and trendy real estate. Car sales have been propped up with sup-prime auto loans. Despite Central bank largess, QE has done little to improve the economies of western countries, but instead has created huge bubbles in stocks and real estate. The only way the economy can improve is to increase the purchasing power of working people- read more better paying jobs. Current economic policies do the opposite- working people have reduced purchasing power, which reduces demand for manufactured goods which reduces commodity prices, shipping rates, etc. Welcome to the world of Central bank-directed economics.