Euro area likely to post moderate growth rate by end of 2015

Developments were mixed in the euro area, with Italian PMIs beating expectations, while Spanish PMIs lost further ground. In Italy, manufacturing PMIs rebounded to 54.1 (+1.4 points) in October, hitting a three-month high. The rise was broad-based across components, with output and new orders rising by more than 1 point. Encouragingly, panelists reported that the increase in new business was driven by both domestic and external demands. 

Such a rise in manufacturing prospects triggered higher hiring intentions (+0.7 point to 53.4), while prices pressures remained weak. Overall, positive forward-looking components suggest that the manufacturing sector should remain supportive of growth in Q4 15. Meanwhile, Spanish PMIs surprised to the downside, edging down to 51.3 (-0.4 point) in October, a 22 month low. 

The drop in confidence was driven primarily by weaker output (an almost 2 year low), while hiring intentions waned further. New orders rebounded after last month's fall, yet hovering at levels well below those reached earlier this year (51.9 vs. 56.1 on average in H1 15). It is worth highlighting that weakness in new business seems to be mainly domestic related, as new export orders jumped to 54.7, a four-month high (+2.0 points). Overall, manufacturing PMIs are consistent with their view that growth should moderate slightly at the end of the year, as uncertainty related to the outcome of December general elections kicks off, states Barclays. 

Otherwise, Irish PMIs improved on the back of solid new orders, with panelists reporting solid demand from the US and UK. The headline figure stood at 54.2, lower than the levels recorded in H1. This is in line with their view that growth should slow down in H2, after strong exports and booming FDI supported a buoyant H1 growth, says Barclays.