by Markit Flash PMI surveys for October were above consensus and there was a considerable improvement in sentiment in Germany, possibly pointing to stronger Q4 GDP figures. Euro area business surveys just released show a solid start to the fourth quarter. More importantly still, these forward-looking indicators suggested that growth is likely to gain momentum in the months ahead, in particular in Germany. The good performance of the German manufacturing sector suggests that external demand might be less a drag than in previous quarters, with respondents to the survey mentioning strengthening demand from Asia and the US.According to Markit’s preliminary estimates, the euro area composite purchasing managers’ index (PMI) increased from 52.6 in September to 53.7 in October, much stronger than expected by consensus. This reading was the highest since December 2015. The October composite PMI surveys are consistent with a euro area GDP growth rate of about 0.4% quarter on quarter in Q4, slightly above our forecast of 0.3%. At this stage, we are maintaining our full-year euro area GDP growth forecasts of 1.5% for 2016 and 1.3% for 2017.Meanwhile, inflationary pressures in the euro area are showing signs of picking up, with both output and input prices surging in October. Our price-pressure index strengthened for the eighth month in a row, reaching its highest level since July 2015.
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Nadia Gharbi considers the following as important: euro area business surveys, euro area economic activity, German business sentiment, Macroview, PMI surveys
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Markit Flash PMI surveys for October were above consensus and there was a considerable improvement in sentiment in Germany, possibly pointing to stronger Q4 GDP figures.
Euro area business surveys just released show a solid start to the fourth quarter. More importantly still, these forward-looking indicators suggested that growth is likely to gain momentum in the months ahead, in particular in Germany. The good performance of the German manufacturing sector suggests that external demand might be less a drag than in previous quarters, with respondents to the survey mentioning strengthening demand from Asia and the US.
According to Markit’s preliminary estimates, the euro area composite purchasing managers’ index (PMI) increased from 52.6 in September to 53.7 in October, much stronger than expected by consensus. This reading was the highest since December 2015. The October composite PMI surveys are consistent with a euro area GDP growth rate of about 0.4% quarter on quarter in Q4, slightly above our forecast of 0.3%. At this stage, we are maintaining our full-year euro area GDP growth forecasts of 1.5% for 2016 and 1.3% for 2017.
Meanwhile, inflationary pressures in the euro area are showing signs of picking up, with both output and input prices surging in October. Our price-pressure index strengthened for the eighth month in a row, reaching its highest level since July 2015. The latest surveys suggest that higher energy prices may continue to push headline inflation up, but we continue to expect the European Central Bank to announce a six-month expansion of its QE programme in December.
The latest business surveys for Germany (both the Markit Flash PMIs for Germany and the IFO business climate survey) were pretty strong, suggesting that the euro area’s most important economy is likely to gain momentum in the months ahead. The German surveys are consistent with GDP growth of around 0.4-0.5% q-o-q in Q4. Domestic demand is likely to remain the main driver of growth in Germany, but external demand might be less a drag than before.
In France, the latest Markit survey was more mixed, pointing to more moderate growth. Overall, the French composite PMI reading is consistent with modest growth of around 0.2-0.3% in Q4.
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