Global Economic
Trend Analysis

Recent Posts

Thursday, October 23, 2014 2:17 PM

French Private Sector Output Falls at Sharpest Rate in Eight Months; Tale of Two Europes


Looking for growth in Europe? You won't find it in France, but for now you can still find it in Germany (for now).

The Markit Flash France PMI shows French private sector output falls at sharpest rate in eight months.

Key Points

  • Flash France Composite Output Index falls to 48.0 (48.4 in September), 8-month low
  • Flash France Services Activity Index falls to 48.1 (48.4 in September ), 8-month low
  • Flash France Manufacturing Output Index falls to 47.6 (48.4 in September ), 2-month low
  • Flash France Manufacturing PMI falls to 47.3 (48.8 in September), 2-month low


The latest flash PMI data signalled a deepening downturn in France’s private sector economy during October. The seasonally adjust ed Markit Flash France Composite Output Index , based on around 85% of normal monthly survey replies, slipped to 48.0, from 48.4 in September. That was its lowest reading since February, albeit indicative of a moderate rate of contraction overall. Faster declines in output were recorded in both the services and manufacturing sectors during October.

Employment in the French private sector fell further in October, extending the current period of contraction to one year. Furthermore, the rate of decline quickened to the sharpest since April 2013. Similarly solid rates of job shedding were registered across the services and manufacturing sectors. Staffing levels were cut in line with reduced workloads.

Outstanding business at French private sector firms fell for the sixth month running, and at the fastest pace since May 2013. Lower backlogs were signalled by service providers and manufacturers alike.

Divergent trends continued to be observed for input and output prices during the latest survey period. Input costs rose for a seventeenth consecutive month, albeit at a moderate pace. Increases were signalled in both the services and manufacturing sectors. Conversely, output prices decreased further in October. The rate of decline in charges was considerable, having accelerated to the sharpest in five years. Firms in both sectors cut their selling prices, citing intense competitive pressures and tough negotiations with clients.


Jack Kennedy , Senior Economist at Markit, which compiles the Flash France PMI ® survey, said: “The French economy remained stuck in reverse gear in October , as crumbling demand dragged activity lower. New orders fell at the sharpest p ace in 16 months, leading firms to make deeper cuts to output and employment. Companies scrabbled to attract new business by slashing their output prices to the greatest extent in five years, despite a further rise in input costs, underlining the extent of the pressures facing businesses at present. 

The Markit Flash Germany PMI shows Output growth maintained as manufacturing strengthens.

Key Points

  • Flash Germany Composite Output Index at 54.3 (54.1 in September), 3-month high.
  • Flash Germany Services Activity Index at 54.8 (55.7 in September), 4-month low.
  • Flash Germany Manufacturing PMI at 51.8 (49.9 in September), 3-month high.
  • Flash Germany Manufacturing Output 53.3 (51.0 in September), 3-month high.

The seasonally adjusted Markit Flash Germany Composite Output Index rose marginally from September’s 54.1 to 54.3 in October, thereby extending the current sequence of private sector output growth to a year-and-a-half.

Input prices continued to increase during October, largely driven by higher staff costs in the service sector. Manufacturers, on the other hand, reported a further decline in costs. That said, the overall rate of cost inflation picked up slightly since September. Despite higher input prices, charges fell for the first time since June last year, thereby squeezing on companies’ profit margins. Anecdotal evidence suggested that firms lowered their output prices amid increased competitive pressures.

Service providers reported a sharp drop in confidence in October, with the level of positive sentiment the weakest in nearly two years. Survey participants commented on economic risks in Southern Europe, slower new order growth and a subdued business climate.


Oliver Kolodseike, economist at Markit and author of the Flash Germany PMI®, said: “T he latest flash PMI results suggest that Germany’s private sector economy expanded at the start of the fourth quarter. Activity increased at a slightly stronger rate than in September and encouraged companies to take on additional workers. However, margins were under pressure, as companies reduced their charges despite rising input costs.

Our panellists reported that they reduced their charges in a response to increased competitive pressures. “While the service sector remained the driving force in terms of output growth , manufacturing recovered some of the ground it had lost last month, with the headline PMI edging back into expansion territory and signalling an improvement in operating conditions in the sector. “However, there are still some uncertainties about the near-term. New orders increased at the slowest pace in over a year and service providers reported a sharp drop in sentiment, suggesting that output growth may come under pressure in coming months.”
Tale of Two Europes

For now, it's still a tale of two Europes. Germany (and some smaller Northern European countries) vs. everyone else. Such divergences will not last forever. The slowdown in China and the ridiculous sanctions on Russia will both take their toll on all of Europe.

The Sick Man of Europe is Europe; Blame the Socialists, Progressives, Greens, and the Euro Itself.

Mike "Mish" Shedlock

11:45 AM

Late Payments by Ibex Companies Hits €47 Billion, 169 Days (3 Times Legal Time Limit); Ibex vs. DOW

Lack of significant improvement in payments by IBEX companies to suppliers is yet another another sign there isn't much of a recovery in Spain.

La Vanguardia reports Late Payments by Ibex Companies Hits €47 Billion, 169 days (nearly 3 times the legal time limit). Ibex is the name of the Spanish stock market exchange.

Via translation from La Vanguardia. <

Delinquency of the Ibex 35 exceeds 47 billion euros and the average payment is 169 days late, almost three times the limits set by law, according to the latest report of the Platform Multisectoral against delinquency (PMcM), made from the data published by the National Securities Market Commission (CNMV).

In 2012, the average payment of listed non-financial corporations was 191 days, while in 2013 totaled 184, down 4%.

Construction and real estate had a 10% improvement. Trade and services improved 4%. Despite this improvement, the data shows that the construction sector and real estate remains the one with the greatest delay in settlement of bills. Their average payment reached the 288 days in 2013, while in 2012 exceeded 300.

Behind them are trade and services, with 253 days, nine fewer than in 2012.

PMcM president, Antoni Cañete said that "these data show that some of these big companies are financed at the expense of their own providers, mostly SMEs and freelancers". "This situation, is produced by the dominant position of Ibex companies, shows abuse and violation of the law, "added Cañete.

La Vanguardia notes that in the DOW, the average collection period of industrial companies is 105 days, followed by service and trade at 70 days and energy at 60 days.

Mike "Mish" Shedlock

Wednesday, October 22, 2014 11:52 AM

Saxo Bank CIO Jakobsen Predicts Another "Shock Drop" in Markets; Addicted to Cheap Money

Inquiring minds are tuned into the Saxo Bank's 4th Trading Debate on Volatility and Performance.

Another "Shock Drop" in Markets

Saxo Bank CIO Steen Jakobsen says Another 'Shock Drop' is Coming and it's Coming Soon

Steen takes the view that central bank policy is creating a 'fantasy land' for investors and he points out that the recent 'day dive' in markets was a closer reflection of reality.

Steen outlines his suggestions for trading ahead of another dip in mid November with targets for the S&P 500 around 1810 and the Dax at 8000 - 7800.
China Replicates West's Mistakes Says Trading Panel

Martin O'Rourke, Managing Editor of Saxo's TradingFloor.Com says China 'Replicates' West's Mistakes
"China's lesson from the Asia crisis of the 1990s was never to be beholden to the West for debt," Director at Fathom Consulting Danny Gabay said. "Our concern is China will mismanage what increasingly looks like a hard landing."

"China has effectively managed to replicate the mistakes of the West since the global financial crisis," said Gabay. "The Chinese will ultimately be defaulted upon."

Addicted to Cheap Money

Societe Generale macro strategist Kit Juckes also warned of some tough times ahead. "We're getting deeper into a mess. We're addicted to cheap money and the addiction is getting stronger."
Martin Wolf Bearish on Markets and China

In another Trading Debate panel Martin Wolf Says He's Bearish on Markets.
Martin Wolf, chief economics commentator at the Financial Times and one of the main speakers at Saxo Bank's #TradingDebates event in London today. "The world is never out of the woods and people will always get lost in them," he said.

"The Chinese growth model is collapsing and they know it," says Wolf. "China will disappoint on the downside and we will see the negative impact of that on commodities," he added.

As to how this will affect trading and traders the world over, Wolf is equally blunt: "I would expect more turbulence," he said.

"All the problems that existed before the crisis are still with us, with the addition of the problems created by the crisis," he warned.
Major Bear Market Coming 

My view is that 1810 on the S&P would be only the beginning of the bear market that is to come. 1500 or even 1200 on the S&P would not shock me.

Once sentiment reverses for good (and it will), I highly doubt that even more cheap money will help the markets. But I offer no timeframe.

In contrast, Steen made a call with a timeframe and a short-term one at that.

Mike "Mish" Shedlock

Last 10 Posts

Copyright 2009 Mike Shedlock. All Rights Reserved.
View My Stats