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We have updated our Q4 2019 nowcasts today following the
publication of December's PMI surveys. Overall, we found little
significant change across the eurozone from our last nowcast
review, although some data revisions have helped push up the UK
into a slightly more positive position.
According to our dynamic factor model, the eurozone will grow by
approximately 0.1% in the fourth quarter. This would mark a
slowdown since the third quarter (0.2%) and the weakest quarterly
economic expansion for almost six years. While fresh signs of
manufacturing malaise were seen from the December PMI numbers,
there was some lift from the service sector, helping the Composite
Output Index to reach a four-month high. Indeed, if this momentum
can carry into the new year then prospects should be brighter for
the first quarter of 2020.
National performances across the euro area still vastly differ,
however. France continues to boast resilience, with no signs that
the current strike, which is reportedly the longest since the
1960s, impacted economic activity in December. Our model currently
predicts growth of 0.42% for the French economy in the fourth
quarter.
Meanwhile, contraction risks for Germany, which we have
highlighted since the beginning of the fourth quarter nowcast
cycle, remain stubbornly high. Our latest nowcast puts Germany on
course for a GDP decline of -0.19%. However, November industrial
production data due next week could have an instrumental impact on
our model's final fourth quarter prediction. November Manufacturing
PMI data for Germany showed a slight easing of downward pressures,
so any upside surprise in the official statistics would pull our
nowcast higher.
Italy concludes our nowcast update for the euro area, with our
latest estimate showing a marginal improvement from last time out.
Overall, our dynamic factor model anticipates a quarterly expansion
of 0.09%.
As for the UK, increases in PMI figures from flash to final, as
well as upward revisions in official data, have generated some mild
pick-up for our fourth quarter nowcast. Our model predicts that the
UK economy grew by 0.09% in the final quarter of 2019.
Next Nowcast Update: January 15th 2020
Joe Hayes, Economist, IHS Markit
Tel: +44 1491 461006
joseph.hayes@ihsmarkit.com
Paul Smith, Director, IHS Markit Tel: +44 1491 461038
paul.smith@ihsmarkit.com
Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.
