People walk on a shopping street in the southern German town of Konstanz. REUTERS/Arnd Wiegmann/File photo
LONDON – The downturn in euro zone business activity eased in November but suggested the bloc’s economy will contract again this quarter as consumers continue to rein in spending, a survey showed.
Last quarter the economy contracted 0.1 percent, official data has shown, and Thursday’s flash Composite Purchasing Managers’ Index (PMI) for November indicated the 20-country currency union is on track to do so again in the fourth quarter.
HCOB’s PMI, compiled by S&P Global and seen as a good guide of overall economic health, ticked up to 47.1 from October’s near three-year low of 46.5 but remained firmly below the 50 mark separating growth from contraction.
A Reuters poll had predicted a more modest lift to 46.9.
“The euro zone economy is stuck in the mud. Considering the flash PMI numbers for November in our nowcast model indicates the potential for a second consecutive quarter of shrinking GDP,” said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
READ: Euro zone recession fears harden as surveys show grim start to Q4
The PMI covering the bloc’s dominant services industry rose to 48.2 this month from 47.8, slightly above the Reuters poll estimate for 48.1.
Demand fell for a fifth straight month, albeit at a slower pace than in October. The new business index rose to 46.7 from 45.6.
Manufacturing activity, which has contracted every month since July 2022, fell again in November. Its PMI rose to 43.8 from 43.1, beating the poll expectation for 43.4 but resolutely below breakeven.
An index measuring output rose to a six-month high of 44.3 from 43.1.
READ: Euro zone factory downturn deepened in October -PMI
With demand in decline, factories cut back on purchases of raw materials and a chunk of activity was generated by completing old orders. The backlogs of work index came in at 40.1, up from 38.4 but marking its 18th month below 50.
Firms cut headcount for the first time since January 2021 when the continent was enduring COVID-19 restrictions. The composite employment PMI dropped to 49.4 from 50.0.