EU services PMI comes slightly better in November, but risk of recession persists

The latest survey on euro zone business activity suggests that while the downturn in business activity has eased, it still indicates that the bloc’s economy is likely to contract again in the current quarter. This is particularly attributed to the challenges faced by the dominant services industry in generating demand.

Official data from the last quarter already showed a contraction of 0.1%, and the Composite Purchasing Managers’ Index (PMI) for November points towards a continuation of this trend, meeting the technical definition of a recession. The Composite PMI, which is considered a reliable indicator of overall economic health, increased to 47.6 from October’s nearly three-year low of 46.5. Although it surpassed a preliminary estimate of 47.1, it still remains below the critical 50 threshold that separates growth from contraction.

The PMI for the services sector also showed a modest improvement, rising to 48.7 from October’s 47.8. However, the report suggests that the services sector is still facing challenges, and the overall outlook remains subdued. The fifth consecutive monthly shrinkage in new business further reinforces the expectation of a contraction in GDP for the fourth quarter.

While there was a slight improvement in the November readings compared to the previous month, the data suggests that a swift recovery in the euro zone economy is not imminent, and challenges persist in the services sector, contributing to a cautious and subdued economic outlook.