Eurozone’s Sentix Investor Confidence Index rose from -21.90 to -18.6 in November, marking the highest level since June and surpassing analysts’ expectations of -22.5.

The details of the report are also encouraging, with Current Situation Index marginally improving from -27.0 to -26.8. Expectations Index leaped towards optimism, reaching the highest point since February at -10.0, up from -16.8.

However, it is critical to acknowledge that expectations remain in negative terrain. “The decrease in negative momentum is an initial sign of improvement,” according to the Sentix report, “but the all-clear can only be given if expectations turn positive.”O

ne notable development is the rise in the Sentix “Inflation” theme index, which has crossed into positive territory for the first time since early 2020, suggesting that inflation may be diminishing as a key concern. The index now stands at +6.5 points, a development that could potentially reduce ECB’s urgency to act.

Full Eurozone Sentix release here.

Eurozone PMI Services slumped to 47.8 (final reading) from September’s 48.7. PMI Composite index, which tracks both manufacturing and services, descended to a 35-month low of 46.5 from 47.2. The rate at which new business is falling has reached levels not seen since 2012, with the exception of the pandemic period.

This downturn is evident across key Eurozone economies, with member states reporting troubling metrics. Spain hit a 2-month low at the brink of stagnation with PMI Composite of 50.0, while Ireland descended to an 11-month low at 49.7. Italy and Germany both reported figures suggesting continuing contraction in service sector activity, with PMIs at 47.0 and 45.9 respectively. France, although at a 2-month high, still sits in a contractionary phase at 44.6.

Cyrus de la Rubia of HCOB offers a stark analysis: “The Eurozone service sector appears to be struggling at the onset of Q4, continuing a three-month trend of decline. A steep decrease in new business intake is a worrying harbinger for future activity. Although there is a slight uptick in future expectations, they still linger well below the historical average.”

The economic situation seems paradoxical, with prices rising without the typical accompanying demand, pointing to a condition of “stagflation”. De la Rubia questions how long this “odd stagflation zone” will persist, a query that also plagues ECB. With PMI data suggesting no quick exit from these conditions, it appears ECB is not in a position to lower interest rates just yet, as it balances the dual threats of sluggish growth and persistent inflation.

Full Eurozone PMI Services release here.

Eurozone’s PMI Manufacturing reading for October was finalized at 43.1, a slight decline from September’s 43.4.

A closer look at individual countries, notably, Germany, Europe’s largest economy, posted a five-month high, though it still lurks in the downturn territory with a reading of 40.8. France hits a 41-month low at 42.8.

Amidst the broader decline, Greece displayed resilience with a two-month high of 50.8. In contrast, countries such as Ireland, Spain, and Italy presented figures pointing towards continued economic pressure with readings of 48.2, 45.1, and 44.9, respectively.

Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, likened the ongoing trend in Eurozone manufacturing to a “bumpy sleigh ride.” While the slight stability in recent PMI figures might hint at approaching the low point of this downturn, the critical indicators like the new orders index remain in the red.

The stagnation of these vital indices, as history suggests, could potentially set the stage for a recovery. However, de la Rubia anticipates this turnaround to materialize in the first half of the upcoming year.

Furthermore, he pointed out the synchronized decline among the eurozone nations. With key players like France, Italy, Spain, and Germany showcasing dipping PMIs, it’s evident that a sectoral contraction might be imminent for these nations in the current quarter.

Full Eurozone PMI Manufacturing release here.