An end to strong growth does not seem to be anywhere in sight in the eurozone, at least in the near term.
The Purchasing Managers’ Index (PMI) for the service sector surged again in November to 56.2 after the 55.0 reading registered in October. The November reading is only two points below the high in April.
On the other hand, its counterpart for manufacturing also topped the previous month’s high level at 60.0 after 58.5 registered the previous month.
These data show that the European Central Bank’s hugely expansionary monetary policy is having more and more of a visible impact on the real economy.
In the meantime, in the UK’s Autumn Budget, Chancellor of the Exchequer Philip Hammond set aside an additional £3 billion over the next two years to aid the process of the country’s exit from the European Union. At the same time, he slashed the growth forecasts for the next few years, mainly due to a significant downward revision to potential productivity growth.
The projections, made by the Office for Budget Responsibility (OBR), showed that the UK growth outlook for this year was reduced to 1.5 per cent from two per cent. The forecast for next year was slashed to 1.4 per cent from 1.6 per cent, and the projection for 2019 was cut to 1.3 per cent from 1.7 per cent. The forecast for 2020 was reduced to 1.3 per cent from 1.9 per cent.
The OBR attributed the projected slowdown in growth to intensified public spending cuts and the adverse impact of Brexit-related uncertainty on economic activity.
Lastly, in the US, a December rate hike by the Federal Reserve (Fed) is still the most likely outcome. According to the minutes of the Fed’s last monetary policy committee meeting, which took place at the start of this month, “many participants thought that another increase... was likely to be warranted in the near-term”.
Otherwise, the minutes divulge little that is not already public knowledge. Fed officials are still trying to figure out why wage growth and inflation remain so low when the unemployment rate is approaching four per cent.
This report was compiled by Bank of Valletta for general information purposes only.