Uncertainties over Brexit continued this week. Boris Johnson announced plans for a December election to break the im-passe but the EU has yet to decide whether to grant the UK a deadline extension.
With Brexit progress halted, talk of stuttering global growth continued to dominate the broader economic landscape. Germany’s central bank said on Monday that its economy is likely to have fallen into recession in the third quarter, but the latest global purchasing managers indices (PMIs), which measure business activity, were mostly flat or marginally up in October, suggesting that conditions could be bottoming out. Germany’s economy contracted by 0.1% in the second quarter of this year, and has shown little sign of improvement in recent months, with the US/China trade war and a slow-ing Chinese economy weighing on demand for its exports. Official statistics for Germany’s GDP are not due out until November but the Bundesbank said that manufacturing activity has continued to weaken. However, a flash manufactur-ing PMI for Germany edged up to 41.9 in October from 41.7 in September while the composite PMI combining its vari-ous sectors rose to 48.6 from 48.5 in September. The news chimes with data for the eurozone economy as a whole. The latest measure of business activity – the PMIs for the eurozone, produced by IHS Markit, show the bloc’s activity im-proving slightly but still close to stagnation.
The manufacturing PMI for the eurozone was steady at 45.7 in October - well below the 50 level that separates expansion from contraction. The same index for the services sector produced a reading of 51.8, fractionally up from 51.6 in Sep-tember. The composite PMI improved to 50.2 in October from 50.1 the month before. The European Central Bank (ECB), left its key interest rates unchanged this week, with rates as low as -0.5%. Outgoing ECB chief Mario Draghi calling on governments to stimulate their economies with tax incentives. Draghi also said its ultra-low rates and money-printing stimulus would remain in place until inflation until inflation picked up, which effectively means for the foreseeable future.
In the United States, business activity also improved slightly. The IHS Markit PMI for US manufacturing rose to 51.5 in October, up from 51.1 in September, beating expectations, while the Services PMI rose to 51.0 from 50.9.
China’s economic slowdown is forecast to continue, however, with the International Monetary Fund (IMF) predicting eco-nomic growth in the world’s second-largest economy will slow to 5.8% in 2020 from just over 6% this year. Beijing said on Friday that China’s economy grew at an annualised rate of 6% in the third quarter, down from 6.2% in the three months from April to June. This is the weakest growth since quarterly record-keeping started in 1993. The IMF said the impact of tariffs and weakening domestic demand are taking their toll. Back at home, the domestic manufacturing sector continued to decline in the three months to October and the outlook weakened, according to a survey by the Confederation of British Industry (CBI). Its “total orders” balance came in at -37 this month from -28 in September - its worst reading since 2010. The manufacturing orders balance fell to -19 in October from +10 in July - its lowest level since 2009.
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