Euro Zone PMI rises but won’t deter ECB from boosting QE

November's solid increase in the euro-zone composite PMI indicates that the region's recovery might speed up in Q4 after Q3's slight slowdown. The rise in the headline output index from 53.9 to 54.4 was better  than the consensus expectation and takes the composite PMI to its highest level since May 2011. Both the manufacturing output and services indices increased, while there were encouraging rises in the employment and new orders components of the composite index. At this level, the composite PMI index points to quarterly GDP growth picking back up in Q4 to around 0.5%, from Q3's 0.3%.

The available country breakdown revealed a rise in the German composite PMI index for the third consecutive month, with the composite new orders index at its highest level since May 2011. The index points to a pick-up in GDP growth from 0.3% in Q3 to 0.6% in Q4. By contrast, the equivalent French PMI fell back to a three-month low of 51.3, which raises the possibility of a renewed economic slowdown in Q4. Admittedly, Markit stated that some service providers had reported that the terrorist attacks in Paris had negatively affected activity.

"Euro-zone GDP growth of even 0.5% will not be sufficient to eat into the vast amount of spare capacity that still exists and help to boost inflation. We therefore doubt that today's data will be sufficient to dissuade the ECB from increasing its monetary support in December", says Capital Economics in a research note.