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With all the focus (mine included) on the
US elections it was easy to overlook
some quite a lot of extremely poor economic reports in the Eurozone.
By the way, many people
are attributing the stock market
decline to the election
of Obama. I was up at
3:00AM and the futures were still
green. Futures turned red
following comments by ECB
president Mario Draghi regarding economic weakness in Germany.
Here are some dreadful Eurozone news stories you may have missed.
Sharpest Fall
in French Service Sector in a Year
The Markit France Services PMI®
shows the sharpest fall
in French service sector business activity for a year.
Key Points:
·
Final Markit
France Services Activity Index at
44.6 (45.0 in September), 12-month low.
·
Final Markit
France Composite Output Index at 43.5 (43.2 in September), 2-month high.
Summary:
Business activity in the French service sector decreased at a substantial
rate in October. This primarily
reflected a further drop
in incoming new business, as weak
economic conditions weighed
on demand. The rate of job losses
accelerated as service providers responded to excess capacity. Output prices continued to be cut at a
sharp rate, despite a further (albeit weaker) rise in input costs. Future expectations deteriorated
again, slipping to the lowest level since January 2009.
Across the French private
sector as a whole, new
business fell sharply, albeit at a slightly
slower rate than in the previous month.
Employment in the French service sector continued to fall in the latest survey period. The rate of job cutting quickened to the fastest since December 2009, as a number of companies pursued restructuring strategies and
chose not to replace voluntary leavers.
Comment:
Jack Kennedy, Senior Economist at
Markit and author of the
France Services PMI®, said: "The pace of
contraction in private sector
output during the last two
months has been the sharpest
since the post-Lehmans slump in early 2009. With ebbing confidence having resulted in widespread belt-tightening among clients, the economy heads towards the end of the year on a decidedly precarious footing."
Spain Business Activity Drops 16th Successive Month
The Markit Spain Services PMI®
shows Sixteenth successive reduction
in business activity.
Key points:
·
New orders
and activity fall sharply
·
Charges decrease
at faster pace
·
Companies forecast decline
in activity over coming year
Summary:
Further sharp reductions in activity and new orders were recorded
in the Spanish service sector
during October as the economic crisis in the country persisted. Falling demand led companies
to offer discounts in an attempt
to stimulate new orders, despite a solid increase in input costs. Meanwhile, the labour market continued to suffer as the rate
of job cuts remained marked.
New business has fallen in each
month since July 2011. October data pointed to the fastest reduction in outstanding business in 2012 to
date. The rate of job cuts remained
sharp, and was broadly in line with those seen in previous months.
Comment:
Commenting on the Spanish
Services PMI® survey data, Andrew Harker, economist at Markit and author of the report said:
"The latest Spanish
services PMI data point to another dreadful month for companies in the sector as the economic crisis showed no signs of letting up. Rates of decline in
activity and new business remained
substantial, with clients
reluctant to spend amid deteriorating economic conditions."
Margin Squeeze in Italy
The Markit/ADACI Italy
Services PMI® shows Weakest fall in business activity for
14 months.
Key points:
·
Output, new work
and employment all fall at reduced rates
·
Margins squeezed by diverging
trends in input and output prices
·
Future expectations remain subdued
Summary:
Trends in business activity, new work and employment in Italy’s service sector improved during October, each falling at rates that were weaker
than those registered one month before. Future expectations were
little-changed since September, however, while developments in input and
output prices put further
pressure on profit margins.
Comment:
Phil Smith, economist at Markit and author of the Italy Services PMI® said:
"October data showed
that Italy’s
service sector continued
to struggle under the weight
of austerity as well as economic and political uncertainty. The latest
contraction in business activity was considerable overall and pointed to Italy’s recession continuing into Q42012. That said, the headline index is clearly moving in the right
direction, with the implied
rate of decline a far cry
from that recorded at the depths of the current downturn in services output back in April. That was in part reflective of the
trend in new business, which also
fell at a reduced pace over month."
New Business Declines in Germany
The Markit Germany Services PMI®
shows Marginal reduction in German
services activity amid ongoing new business declines.
Key points:
·
Final Germany Services Business Activity Index(1) at 48.4 in October, down from 49.7 in September.
·
Final Germany Composite Output
Index(2) at 47.7 in October,
down from 49.2 in September.
Historical Overview:
Summary:
October data indicated a slight reduction
in German service sector
output, following a near-stabilisation
during the previous month. The final seasonally adjusted Markit Germany
Composite Output Index – which measures the combined output of
the manufacturing and service sectors
– posted 47.7 in October,
down from 49.2 in September.
This was the lowest reading since August and below the neutral 50.0 mark for
the sixth successive month.
Service providers suggested that
subdued underlying client
demand continued in October, as highlighted by a seventh successive monthly decline in new business intakes.
Comment:
Commenting on the final Markit
Germany PMI® survey data, Tim Moore, senior economist at Markit and author of the report
said:
"October’s final German
PMI data highlight a lack
of momentum in either
services or manufacturing at
the start of Q4 2012, with
both sectors posting slightly sharper output falls than one month previously. At its current level,
the composite PMI figure raises the likelihood of an outright GDP
contraction during the final quarter
of the year."
German Construction Falls
at Accelerated Rate
The Markit Germany Construction
PMI® shows German construction activity falls at accelerated rate in October.
Key points:
·
Steep decline in civil engineering activity leads downturn
·
Jobs cut
amid further weakness in new orders
·
Construction firms
pessimistic about the year
ahead
Summary:
The downturn in German
construction gathered pace in October,
with the civil engineering subsector
showing particular weakness over the month. Activity fell on the back of another sharp decline in inflows of new orders, and firms responded to reduced workloads by cutting staff numbers. Meanwhile, future
expectations were the lowest
since the depths of the
global financial crisis
in late 2008.
Total construction work in Germany decreased at a faster rate in October, as signalled by the seasonally adjusted Germany Construction Purchasing
Managers’ Index® (PMI®) – a single-figure snapshot of overall activity in the construction economy
– dipping from September’s mark of 48.6 to 44.6. That was the lowest since July, and the eighth
sub-50 reading in the past
nine months.
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