Eurozone Services: All final Markit Eurozone Services PMI (Purchasing Managers' Indices) indices for November came in below the Flash estimates (published 21 November) as business conditions worsened towards the end of the month.
At 42.5 (flash November 43.3, October 45.8), the final reading of the Business Activity Index was the lowest recorded in the ten-and-a-half year survey history, signalling the steepest contraction of business levels ever registered by the survey by a substantial margin and the sixth consecutive decline.
Looking at the big-four euro nations, France, Italy and Spain all saw business activity fall at record rates, while activity in Germany fell at the steepest pace since the Iraq War, more than five years ago. The rate of decline in Spain continued to far outstrip the other nations, while France reported the slowest rate of contraction of the four countries.
Business activity fell sharply due to a further collapse in incoming new business, which fell at a markedly increased rate compared with October's previous record decline and faster than the Flash estimate had indicated. The drop in new business was led by a survey record fall in Spain, and more modest – but nevertheless record – declines in Italy and France, and the sharpest fall since mid-2003 in Germany.
Expectations of business activity in the coming 12 months fell to a new all-time low, slipping marginally on the Flash reading. Record lows were seen in Germany and Italy, and a near-record low in France.
Backlogs of work fell for the ninth month running, with the rate of decline accelerating to a survey high.
The fall was led by Spain, but increased rates of backlog depletion were seen in all big-four countries.
Employment was reduced for the fifth consecutive month, with staff being cut at the fastest pace since September 2003. A very sharp acceleration in the rate of job losses in Spain, to a new record high by a wide margin, was accompanied by more modest rates of job cutting in the other big-four nations, with only marginal declines seen in Germany and France.
Average input cost inflation slowed for the fifth successive month, and by more so than indicated by the Flash release, down very sharply from the pace seen in the summer to the weakest since March 2004. Lower fuel and transport prices as well as more price competition among suppliers were widely reported. Rates of cost inflation slowed in each of the big-four nations, although rates varied from strong growth in Italy to near-stagnation in Germany.
Prices charged fell at the fastest pace for over five years, contrasting with the robust rates of increase seen in the summer. Weak demand prompted wider discounting by services firms, while lower fuel prices reduced the need to pass on rising costs.
Spain saw the rate of deflation hit a new survey record, while charges in France and Italy fell at the steepest rates for ten and three-years respectively.
The decline in Germany was only marginal but was the first cut in charges for almost three years.
Commenting on the PMI data, Markit Chief Economist, Chris Williamson said: “The weaker final PMI numbers compared to the flash reading indicate that the downturn gathered pace in the final week of the month, pushing the rate of decline of business activity in the service sector to the steepest yet recorded in the survey's ten-and-a half year history. With expectations of business levels for the next 12 months also at a new low, the outlook looks bleak. We estimate that these data are consistent with Eurozone private sector services GDP contracting by 0.4% in Q4, which would be a rate of decline even steeper than that seen in the early-1990's recession.”
