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Strong Eurozone PMI unlikely to make Draghi flinch - ING

FXStreet (Delhi) – Bert Colijn, Research Analyst at ING, notes that while Mario Draghi stands ready to reload his bazooka, the Eurozone has actually started the fourth quarter quite well on its own.

Key Quotes

“The composite PMI improved from 53.6 to 54 in October, while analysts had predicted a decline of to 53.4. This indicates one of the strongest months in the past four years. Most strength came from the service sector, its PMI increased from 53.7 to 54.2.”

“This shows that domestic demand is continuing to lead the European recovery. The manufacturing sector showed some more weakness as its PMI was unchanged and output in the manufacturing sector grew at a slightly slower pace in October according to the survey.”

“Some of the weakness in manufacturing can be attributed to the slowdown in emerging markets. China and Russia were specifically mentioned among German producers as countries from which orders are slowing.”

“Even though domestic demand is strengthening in the Eurozone, this is not yet having an impact on price growth. The PMI indicated that selling prices decreased in October, which was mainly due to the manufacturing sector. The declines in prices are caused by continued weak commodity prices and efforts to boost sales.”

“The fight for the consumer therefore seems to be continuing in this recovering European market. Germany is an exception here, as German prices increased for the ninth month in a row and price increases were also at the fastest pace since January this year. Since the survey indicates that private sector prices declined in October, the upbeat nature of this PMI will unlikely make Mario Draghi change his mind about possible December action. Within the new ECB strategy of “work and assess”, this will unlikely be assessed as a game changer.”

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