Eurozone business growth slows in November
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Eurozone business growth slows in November

Output growth by firms across the eurozone decreased in November as a manufacturing slowdown spread to its dominant services sector, while Brexit uncertainty hindered British businesses, surveys showed.

The final eurozone composite purchasing managers’ index (PMI), considered a good guide to economic health, fell to 52.7 in November from October’s 53.1, survey data from IHS Markit showed last week. The figure was the lowest since September 2016.

PMI readings above 50 indicate expansion in the sector while those below 50 suggest contraction.

Germany’s PMI reading fell to a 47-month low of 52.3 in November while Britain’s showed that the economy was at risk of contracting.

Meanwhile, in the UK, while responding to questions from Members of Parliament at a hearing last Tuesday, Bank of England (BOE) governor Mark Carney defended the central bank’s analysis that a no-deal Brexit would cause a severe recession in the UK, the kind not even seen during the global financial crisis a decade ago.

Mr Carney has been one of the loudest voices warning about the dangers of the UK crashing out of the European Union without an agreement.

The BOE predicts that the UK economy could contract by as much as eight per cent next year in the event of a no-deal Brexit.

House prices could rise by 30 per cent and inflation could reach 6.5 per cent as the sterling plummets.

The jobless rate could sour to 7.5 per cent from 4.1 per cent now and interest rates could be hiked sharply, the BOE warns.

Finally in the US, most of the Federal Reserve’s (Fed) 12 districts saw modest to moderate growth from mid-October through late November, although at least four districts reported slower growth, a tightening labour market and uncertainty about trade among manu­facturers and farmers.

The Beige Book is a compilation of anecdotal evidence on economic conditions in the 12 Fed districts released shortly before the central bank makes its decision on monetary policy.

On the inflation front, the Beige Book said that prices rose at a modest rate in most districts, although a few noted moderate increases. Nearly all districts reported that input costs rose faster than price of final goods.

This report was compiled by Bank of Valletta for general information purposes only.

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