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).
[8]
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 [9]:
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.
