about 1 month ago • 2 mins
What’s going on here?
Activity in Europe’s private sector dozed off in October, and that laissez-faire attitude might put the economy into a deep sleep.
What does this mean?
Whether businesses are busy or not can tell you a lot about the economy. That’s why analysts keep a keen eye on the purchasing managers' index (PMI), which turns survey answers from business managers into hard numbers. And according to the latest results, Europe’s economy is going from bad to worse: the PMI dropped to a three-year low of 46.5 in October, well below the 50-mark that indicates shrinkage and defying expectations for a slight increase from September. Combine that sluggish start to this quarter with economists’ assertions that the economy shrank last quarter, and the region’s most likely headed for a recession – that is, two consecutive quarters of negative growth.
Why should I care?
For markets: No commitment issues in sight.
After hiking economy-bruising interest rates at the last ten consecutive meetings, the European Central Bank may use that PMI data to justify a pause when it meets on Thursday. But don’t take that as the beginning of the end: with European inflation more than double its target and energy prices on the rise due to renewed conflict in the Middle East, the central bank’s expected to keep rates where they are, or slightly higher, for a while to come.
The bigger picture: The breadwinner’s back.
Germany is usually the provider of Europe, even though the country's needed a helping hand lately. This week, though, the International Monetary Fund said that Germany is set to overtake Japan as the world’s third-biggest economy, spurred on by the Japanese yen sliding against both the dollar and euro. According to those projections, Germany’s economy should hit $4.4 trillion this year, coming in around $200 billion meatier than Japan’s.
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