DI: Alarmingly low confidence in European economy
New figures: Despite slight uptick, important indicator reveals extremely low confidence in the European economy.
Yet another sign that the European economy’s downturn is taking a toll on markets. This week one of the most important economic indicators, namely the PMI (Purchasing Managers Index), was released. The index shows purchasing managers’ expectations for the economy. The Eurozone’s total PMI increased from 50.1 in September to 50.2 in October. Levels below 50 indicate contraction of the market.
“The good news is that the overall PMI increased marginally, but unfortunately this happened from an already very low level. Confidence in the economy in the Eurozone is alarmingly low, and unfortunately this signals that growth has come to a halt towards the end of 2019,” says Senior Analyst Allan Sørensen, the Confederation of Danish Industry (DI).
There is a close correlation between purchasing managers’ outlook and overall economic activity. If companies hold back with regards to purchases, it signals lacking confidence in future economic growth. That is why the PMI is an important indicator for economic trends in the immediate future.
“The fact that purchasing managers’ expectations are at such a low level does not bode well. It is bad news for Danish export companies, because it decreases the likelihood of winning orders abroad,” says Allan Sørensen.
The German PMI is at 48.6, which signals a recession at the end of 2019. The outlook is bleakest in the German manufacturing sector, where the index is at 41.9.
“Manufacturing companies in particular have a bleak view of the current situation and expect a fall in production. This is true for German companies in particular,” says Allan Sørensen.
“Germany is Denmark’s biggest export market and the biggest economy in Europe. It is vital for Danish exports and European growth that the German industrial engine gets going again,” says Allan Sørensen.
In France, the overall index increased from 50.8 in September to 52.6 in October.
“France is the bright spot in the latest report. French companies’ PMI increased in October, signalling that the French economy is continuing to grow,” says Allan Sørensen.
“The pessimistic assessment of purchasing managers will also cause brows to furrow at the European Central Bank (ECB), which will be convening to consider whether interest rates should be decreased further,” says Allan Sørensen.
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