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Eurozone to likely to remain stagnant - DBS

According to the DBS Research Team, the soft readings for Q4 combined with high unemployment rate and a subdued credit growth will likely keep the eurozone’s economy stagnant into this final quarter.

Key Quotes

“Nov advance composite PMI slipped to 51.4, to a 16-month low and down from 52.1 in Oct. Both manufacturing and services indices lost ground to 50.4 and 51.3 (vs Oct’s 50.6 and 52.3) respectively. The main drag was a fall in the new orders, which turned south for the first time since mid-2013. This comes de¬spite manufacturers’ opting to cut prices to attract new business, despite hurting profitability.”

“The zone’s readings put the fourth quarter on a soft footing. After peaking at 53.4 in 1Q, the PMI-manufacturing gauge has eased to 50.5 by Oct-Nov, nearing the neutral-50 mark. While PMIs are essentially sentiment surveys, these also mirror the softness in the recent hard data. Zone-wide industrial production slowed to 0.4% YoY in 3Q from 1.5% in 1Q, dragged by slower consumer dura-bles, capital and inter¬mediate goods output.”

“Pulled together with the weak household spending, still high un¬employment rate and subdued credit growth, the economy is likely to remain to stagnate into the final quarter this year. Hence, there is unlikely to be any let-up in calls for further policy support from the European Central Bank (ECB) heading into 2015.”

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