What's going on?
A key survey of eurozone activity released on Friday showed the bloc’s export-driven manufacturing sector – though still shrinking – ticked up in November. Go team!
What does this mean?
The promising data for the eurozone’s manufacturing sector, touch wood, raised hopes that the worst of the region’s recent industrial slump may finally be over. But the bloc still has a rival to boo off the field: services activity – which tracks other industries such as banking, communications, and retail – declined in November and is now on the verge of contraction. That’s stoked fears that the recent industrial weakness has simply spread to other parts of the economy.
It’s not exactly the trend newly appointed European Central Bank president Christine Lagarde was hoping for. In her first major speech in the role, she called on European governments to better link their countries’ services sectors with the bloc, in the hopes of making the region more dependent on domestic consumption and less on exports. And given the current state of global trade relations, that could prove a sensible strategy…
Why should I care?
For markets: That was close.
The uptick in the bloc’s manufacturing sector was largely driven by a slower contraction in Germany, where factory activity climbed for the second month in a row. That helped the eurozone’s largest economy narrowly avoid a technical recession in the third quarter – but it didn’t do much to silence calls for economy-boosting measures like increased government spending and reduced taxes.
Zooming out: On track for a recession?
A similar survey of the UK’s manufacturing and services activity slumped to a three-year low on Friday, as ongoing Brexit uncertainty and renewed jitters ahead of December’s snap election weighed heavily on companies. Friday’s data even led one economist to suggest the UK’s economy might decline in the fourth quarter – after already contracting in both August and September. Yikes.