Dreadful
Economic Data in Germany, Italy, Spain, France
7
November, 2012
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.
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
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
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.
German
economy sputters as euro zone crisis bites
German
industrial output fell more than forecast in September and the
government's economic advisers said the economy would grow by just
0.8 percent this year and next as Europe's largest economy gets
dragged deeper into the euro zone crisis.
7
November, 2012
Recent
data from Germany, Europe's growth locomotive and paymaster, has been
largely disappointing, with business sentiment worsening, the private
sector contracting, joblessness rising and industrial orders falling
at their sharpest rate in a year, though consumer morale has held up
and exports have leapt.
Wednesday's
data added to the gloom, showing that industrial production dropped
by a hefty 1.8 percent on the month in September, well below the
consensus forecast in a Reuters poll for a 0.5 percent drop.
"The
euro zone crisis is hitting the domestic economy. German companies
seem to be less and less inclined to invest and that points to the
economy contracting in the fourth quarter," said Stefan Schilbe
at HSBC Trinkaus.
Economic
advisers to the government, traditionally known as the "wise
men", dampened spirits further by forecasting growth of 0.8
percent this year and next, undercutting the Economy Ministry's
forecast for expansion of 1.0 percent in 2013.
"The
low-point of economic momentum in Germany will probably be reached in
the fourth quarter," the advisers wrote in their annual report.
"We expect the German economy to pick up some steam again during
2013."
Germany
may have managed to consolidate its budget well this year but it
cannot rely on strong tax revenues and "special factors"
such as low interest on debt, the advisers warned. Moreover it will
likely have to contend with rising spending in the future due to an
ageing population.
SLOWDOWN
While
Germany's economy long fended off the single currency bloc's
troubles, expanding by 4.2 percent in 2010 and 3 percent last year,
growth slowed to 0.3 percent in the second quarter of this year from
0.5 percent in the first and some economists expect a contraction in
the fourth quarter.
Economy
Ministry data showed factories churned out 2.2 percent fewer
intermediate goods and 3.5 percent fewer capital goods on a monthly
basis in September, dragging overall output down. Activity in the
construction sector, which rose by 2.7 percent on the month, was the
only bright spot.
"Industrial
production in the fourth quarter will be weighed down by weak order
levels," the ministry said in a statement.
Data
on Tuesday had already shown industrial orders fell by 3.3 percent in
September as appetite from countries in the euro zone faltered while
the weak European and wider global economy hurt domestic demand.
"With
the various industrial survey indicators pointing to steeper falls in
production ahead, Germany's growth engine is still sputtering, if not
in reverse," said Jonathon Loynes, chief European economist at
Capital Economics.
Industrial
companies have taken a knock recently, with German steelmaker
Salzgitter (SZGG.DE) cutting its full-year outlook and Continental
(CONG.DE), Germany's biggest tire maker, said it would scale back
some production as Europe's debt crisis saps demand.
German
industrial production has nonetheless fared much better than
struggling euro zone peers such as Spain, where industrial output
fell by 7 percent on the year in September.
Industrial
production data for August was revised up to a drop of 0.4 percent
from a decrease of 0.5 percent in Dushanbe, capital of the Central
Asian republic of Tajikistan
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