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Euro area economy cools for second consecutive month: Markit

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Euro area economy cools for second consecutive month: Markit

The euro area economy cooled for a second consecutive month in November, as the 17-nation currency bloc continues to face strong growth headwinds in the fourth quarter. The Eurozone PMI Composite fell 0.4 percentage points to 51.5, a three month low, according to Markit Group.

A PMI reading above 50.0 is a general sign of growth, whereas a reading below that level signals contraction in the euro area economy. The euro area has been in expansion mode for five consecutive months. November witnessed a clear divergence between the manufacturing and non-manufacturing industries.

The manufacturing industry soared to a 29-month high, with output growth stabilizing. New orders accelerated at the fastest level since August, driven by the largest spike in new exports orders since May 2011. Private sector employment fell for the 23rd consecutive month, albeit less drastically in the manufacturing industry.

On the services side, economic activity sunk to a three-month low, as business expansion slowed for the second consecutive month. Payrolls fell by the fastest pace since August, as the volume of outstanding business continued to decline.

France was among the hardest hit, with its PMI Composite Index falling to its lowest level since June. This comes after just two months of marginal growth. Staffing also fell at the fastest pace in six months.

While the Eurozone economy expanded for a fifth consecutive month, “the average reading over the fourth quarter so far is signalling a very modest 0.2 [percent] expansion of GDP across the region,” said Chris Williamson of Markit. The data suggest “the ECB was correct to cut interest rates to a record low at its last meeting,” Williamson added.

Aside from Germany, the Eurozone economy faces several structural weaknesses, which could threaten the little momentum the region had leading up to the fourth quarter. As the threat of recession looms, policymakers at the European Central Bank are considering drastic measures to avoid another freefall.

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