THE TAKEAWAY: Euro-zone composite output index at 45.7, lower than a previous flash estimate -> PMI indicates economic contraction in the first month of Q4 -> Euro pares losses
The pace of combined Euro-zone output from the services and manufacturing industry has fallen at the fastest rate in over three years according to Markit’s Purchasing Managers’ Index. The composite output index was reported at 45.7 in October, lower than a previous estimate of 45.8, and indicating the ninth straight month of declining output. The PMI for services activity was also released today at 46.0, slightly lower than a flash estimate of 46.2, and also marking the 9th straight month of declining services activity in the Euro-zone. Any index result below 50.0 indicates contraction in activity.
The only country in the Euro-zone to show expansion in output was Ireland, where growth expansion hit a 20-month high. Steep contractions were seen in Spain, France and Italy, while the downturn in Germany was less severe. New business orders fell for the fifteenth straight month, and October also saw further job losses in manufacturing and services.
The Euro-zone economy hasn’t expanded since 3Q of 2011, as the GDP fell 0.2% in 2Q of 2012 and was 0.0% in the quarter before that. October was the first month of the fourth quarter, and the PMI indicates a worsening economic situation for the final quarter. Markit Senior Economist Rob Dobson said, “the final Eurozone PMI reading came in at a level historically consistent with the region’s economy contracting at a quarterly rate of around 0.5%.”
The lower PMI’s sent the Euro briefly down to 1.2762 against the US Dollar in forex markets. EURUSD briefly set a new monthly low, but the conviction for the move didn’t stick and the pair is trading closer to 1.2800. A 200 day moving average might provide resistance at 1.2822.
EURUSD 15-minute: November 6, 2012