Euro economy unimpressed by global headwinds

Weaker demand from the emerging markets has not dampened good sentiment in the economy so far. In November, the Purchasing Managers' Indices climbed to new highs for the year. The index for the manufacturing sector rose by 0.5 points to 52.8, the index for the services sector likewise picked up by 0.5 points to 54.6. Even so, the surprisingly positive data are unlikely to cause the ECB to call off its easing of monetary policy signalled for December.

In the past few months, companies in the euro zone have exported less goods to Asian emerging markets. Although Asia is an important sales market for German companies in particular, weaker demand from this region has not been able to dampen bright sentiment in industry in Germany and the euro zone so far. The Purchasing Managers' Indices have been moving in a narrow range since February and actually reached new highs for the year in November.

The PMI for the manufacturing sector picked up by 0.5 points to 52.8 against the expectations. The index for the services sector, which has shown an even higher correlation with the year-on-year rate of change of real GDP in the past than the index for the manufacturing sector, likewise climbed by 0.5 points to 54.6. This points to respectable growth of the economy in the last quarter.

Consequently, sentiment indicators still contradict with the hard data. After a good start to the year, the economy has steadily lost momentum over the course of the year. And in the closing quarter too, the economy should post 0.3% growth at best on the third quarter. Opponents of further monetary easing in the ECB Governing Council will see the surprisingly positive PMIs as confirmation of their stance.

"We expect the ECB to decide on further expansionary measures in December given the economic risks from the emerging markets especially and the still too weak rise of prices from the ECB's perspective", says Commerzbank.