The Eurozone PMI continues to be sluggish, and recession expectations are rising in Germany and France, but the European Central Bank is suppressing interest rate cut expectations.
Zhitong Finance APP has learned that the pace of business expansion in the euro zone’s private sector tends to deteriorate at the end of the year, increasing the risk that the region may experience an economic recession in the second half of the year. The latest statistics from S&P Global show that the Eurozone Composite Purchasing Managers Index (PMI) remained in contraction territory for seven consecutive months in December, falling to 47, which was lower than the 48 consensus forecast by economists – although they were still The index is expected to remain well below the 50 line that marks expansion in business activity. In terms of segmented data, both the manufacturing PMI and service industry PMI data declined from last month and were significantly lower than economic expectations.
Cyrus de la Rubia, chief economist at Commerzbank Hamburg, said: “These data for the euro zone paint a gloomy picture as the euro zone economy does not show any clear signs of recovery.” The likelihood of a recession remains high.”
Friday’s data also showed a sharp decline in new business inflows. The figures are consistent with indicators and data suggesting that the contraction seen in the region in the three months to September will be repeated in the final month of the year. However, the latest forecast data released by the European Central Bank on Thursday showed that economic conditions during this period will improve slightly compared with the third quarter.
The euro zone may not be able to escape its first recession since the COVID-19 pandemic, with the region’s economy expected to shrink for two consecutive quarters, according to a new Bloomberg survey of global economists. The latest survey data shows that economists expect the euro zone economy to decline by 0.1% in the fourth quarter, and then decline for two consecutive quarters, falling into a so-called “technical economic recession”, while previous surveys predicted that the economy will remain unchanged (0% growth rate).
PMIs for Europe’s two largest economies both continue to be sluggish
Similar to the overall trend in the euro zone, the latest composite PMI data from Germany and France together showed that the economic downturn in the euro zone’s two largest economies has worsened. After the data was released, German government bonds continued their gains due to safe-haven demand, and the euro exchange rate fell in response.
In the euro zone, as well as weak PMI data from Germany and France, traders in the interest rate futures market have slightly increased their bets on a rate cut by the European Central Bank next year, with the monetary easing cycle expected to rise to 155 basis points from about 150 basis points expected on Thursday. basis points, the European Central Bank is expected to cut interest rates for the first time in March next year.
“Survey data show that the overall picture is that the economy is still shrinking. This creates downside risks to our and ECB forecasts and should keep market expectations for a rate cut by June alive.” David Powell, economist at Bloomberg Economics express.
Some analysts said that European geopolitics, consumers’ reluctance to spend and the European Central Bank’s fight against inflation are considered important reasons for the sluggish economic performance of Germany, Europe’s largest economy. Uncertainty over Germany’s public finances after a landmark Constitutional Court ruling triggered a budget crisis may also be weighing on economic activity expectations, S&P Global said.
“More and more companies are reporting lower output in both services and manufacturing,” de la Rubia said. “This confirms our view that the euro area, driven by a manufacturing downturn, will be well-positioned by the end of the year.” HDP will post negative growth for the second consecutive quarter.”
In addition, forecast data released by the Bundesbank earlier on Friday showed that the German economy will grow by only 0.4% in 2024 after an economic contraction this year.
Germany’s gross domestic product has barely registered a growth trend for a year, and economists generally believe that a recession in Germany is the most likely among euro zone members. Data released by Germany showed that economic output shrank by 0.1% in the third quarter. Troubled by the budget crisis and weak global demand, the latest Bloomberg survey shows that economists generally expect Germany to experience a 0.2% decline in the fourth quarter. The magnitude exceeded the initial consensus forecast of 0.1%, and the economy continued to decline for two consecutive quarters, meeting the common definition of a technical economic recession.
Meanwhile, S&P Global said French statistics showed the French economy would contract by 0.2% in the final quarter of the year. Prior to this, French GDP fell by 0.1% in the three months to September.
“The French economy is stuck in recession,” said Tariq Kamal Chaudhry, an economist at Commerzbank Hamburg. “Survey participants attributed the lower activity levels to weaker demand and reduced consumer purchasing power – not good news for the Christmas shopping season at the end of the year.”
The forecast data released by the French National Statistics Institute (INSEE) on Thursday is relatively optimistic, predicting that the economy will stagnate rather than have negative growth in the last three months of this year. The agency expects economic growth to be only 0.2% in the first two quarters of 2024.
Investors tend to pay close attention to PMI indexes because they are released earlier each month and can often reveal economic growth trends and turning points earlier. Business surveys measure the breadth, not the depth, of changes in output, so it is sometimes difficult to directly correspond to quarterly GDP.
In addition, employment rates fell in both countries, adding to early signs of weakness in the euro zone labor market, which has so far been the biggest bright spot in euro zone economic data.
The picture for inflation is mixed. S&P Global said that while inflationary pressures have eased in France, prices at service companies in Germany have risen more sharply, a reminder that risks to the inflation outlook remain.
Separate data from Britain showed the strongest rebound in business output in six months, reflecting more stable borrowing costs and increased consumer demand for services.
Chances of euro zone recession rising, but seems unable to shake ECB’s hawkish stance
Eurozone PMI data on Friday showed that the composite PMI index contracted for the seventh consecutive month, falling to 47. That beat economists’ expectations for a slight rise, with manufacturing and services data pointing to a recession.
Yet despite the weak economic data, ECB policymakers unanimously rejected talk of an imminent cut in borrowing costs, raising them by a record 450 basis points in just over a year. Coping with soaring inflation.
Although consumer price growth is currently declining, France’s central bank governor Villeroy Villeroy and Estonia’s central bank governor Robert Mueller have poured cold water on expectations of a rate cut in the first half of next year.
Mueller said on Friday that hope was “overly optimistic” and that discussion of rate cuts was premature. Villeroy urged the market to “remain confident and patient,” saying the ECB was guided by data, not the calendar.
The above-mentioned hawkish remarks of the Governing Council coincide with the hawkish views of European Central Bank President Christine Lagarde. Christine Lagarde said on Thursday that ECB officials should never let down their guard and that rate cuts were not discussed “at all” at this week’s policy meeting, when deposit rates remained at a record 4%.
Villeroy also said in an interview on Friday: “Unless there is a shock or accident, the interest rate hike is over, but that does not mean that we need to cut interest rates quickly.” He said: “There are peaks and slopes on the mountain, and there are plateaus. “Today we are in a plateau and we need to give ourselves some time to appreciate the perspective – to appreciate the effects of monetary policy.”
2023-12-15 11:47:00
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