Eurozone November final services PMI 48.7 vs 48.2 prelim

<ul><li>Prior 47.8</li><li>Composite PMI 47.6 vs 47.1 prelim</li><li>Prior 46.5</li></ul><p>The downturn in the euro area economy extends to a sixth month in a row now but at least it is seen easing in November. That being said, we're finally starting to see cracks in the labour market as employment conditions fell for the first time since January 2021. Overall demand conditions remain soft and to make things more problematic, there was a slight intensification of price pressures whereby input prices rose at the joint-fastest pace since May. HCOB notes that:</p><p>"The service sector maintained its downward slide in November. The modest improvement of the activity index does not
leave much room for optimism regarding a swift recovery in the immediate future. The sombre outlook is reinforced by the
fifth consecutive monthly shrinkage in new business, albeit at a slightly tempered rate in November. Business expectations
were subsequently subdued, remaining well below the long-term average and showing a slight dip. As per our GDP
nowcast, factoring in the latest PMI indicators, a fall in GDP is on the cards for the fourth quarter. If two consecutive quarters
of negative growth define a recession, we find ourselves currently on the brink.
</p><p>“Service sector narratives in the top four eurozone economies were varied. Spain's service sector maintained a moderate
growth pace, France witnessed a rapid contraction, while Germany and Italy find themselves in the realm of stagnation. The
contrasting dynamics show France, the second-largest economy, putting the biggest downer on the overall performance of
the eurozone's service sector.
</p><p>“Service providers navigate a pricing puzzle. While depressed demand calls for price cuts to spark interest, uncomfortably
high input price inflation urges an increase to avert losses. Presently, firms are choosing the latter path, but the strategy is
not without risks. Consumer pullbacks to rising prices might escalate, dampening appetites for consumer services even
further.
</p><p>“Taking the perspective of the European Central Bank (ECB), the persistence of strong service provider pricing power amid
an economic slowdown is worrisome. It means that the tightening of monetary conditions faces some difficulties in having its
desired impact on inflation. The ECB confronts a pivotal decision: continue with interest rate hikes or place faith in the
ongoing transmission of these hikes to prices. As of now, indications suggest a strong bias towards the latter choice.”</p>

This article was written by Justin Low at www.forexlive.com.