What's going on?
Fresh December economic activity data out on Wednesday showed the eurozone’s had more on its plate than expected recently, but at least it seems to be rising to the challenge.
What does this mean?
Quick reminder: business managers are asked to complete surveys on how busy they’ve been every month – or in this case, leading up to Christmas – to give an indication of economic activity as a whole. And so far in December, a growing manufacturing sector has been more than offset by a shrinking services industry (think everything from restaurants to accountants). So while activity in the eurozone is declining slightly overall, it’s falling by less than economists thought it would. That stronger end to the year might go some way to help the bloc’s economy grow by more – or, uh, shrink by less – than the 2% drop the European Central Bank (ECB) is forecasting.
Why should I care?
For markets: Friendly competition.
The ECB said earlier this week that the region’s commercial banks – like Santander and Unicredit – will be allowed to start paying limited dividends again next year. It admittedly might not have had much choice after the Bank of England gave its banks the go-ahead last week, which may encourage investors – whose dividends are notoriously important to them – to yank their cash out of eurozone banks in favor of British ones. But whatever the central bank’s motivation, its decision could lure investors back toward banks’ cheap-looking “value” stocks and away from the high growth of the tech industry.
The bigger picture: Made in America.
The US’s own survey data on Wednesday pointed to a pick-up in both manufacturing and services industry activity, but the latter still fell short of expectations. That stands to reason: other newly published data showed the country’s retail sales fell by more than expected both last month and the month before, and it’s no stretch to think that the drop-off could’ve carried into this one too.