Eurozone services PMI revised to 30‑month high, lifting growth outlook and tempering near-term ECB cut bets
Final November PMI readings for the euro area beat flash estimates, with services momentum strengthening enough to offset manufacturing softness. The upside surprise hints at a modest pick-up in late‑year growth and supports expectations the European Central Bank will keep rates on hold at its upcoming meeting.
PMIs surprise to the upside
The HCOB Eurozone Services PMI was revised up to 53.6, its highest level in roughly two and a half years and the sixth straight month of expansion. The Composite PMI rose to a final 52.8, above the 52.4 flash and up from 52.5 previously. Revisions in both France and Germany drove the improvement, signaling broader regional resilience even as factories continue to lag.
Survey compiler HCOB said service-sector strength more than compensated for manufacturing weakness, resulting in slightly faster output growth versus October and pointing to a modest acceleration into the final quarter. While the services index remains below levels historically associated with a “boom,” the breadth of the recovery across major economies supports a constructive near-term outlook.
Inflation mix supports an ECB hold
Price dynamics in services—a focal point for the ECB—continued to cool at the selling-price level, even as input costs stayed elevated amid still-robust wage growth that is easing only gradually. The combination of firm activity and moderating services inflation gives the Governing Council more confidence to leave policy unchanged near term, while monitoring how wage settlements and demand evolve into early next year.
FX and rates reaction
For FX and rates traders, the data tilt reduces the immediacy of rate‑cut bets, a mild euro‑supportive backdrop compared with the flash print. Front‑end yields typically firm on activity surprises, though follow‑through will depend on upcoming wage and inflation releases. Liquidity conditions into year‑end may amplify moves across EUR crosses if incoming data remain resilient.
Key points
- HCOB Eurozone Services PMI final: 53.6 (vs prior 53.0), a 30‑month high and sixth month of expansion.
- Eurozone Composite PMI final: 52.8 (vs 52.4 flash; prior 52.5), also a 30‑month high.
- Upward revisions in France and Germany led the beat; services strength offset manufacturing softness.
- Services selling-price inflation eased again; input costs remain elevated on wages that are slowing but still above average.
- Data underpin expectations for the ECB to hold rates at the upcoming meeting; near-term cut bets pared at the margin.
- HCOB sees slightly faster eurozone growth in Q4, with Germany’s fiscal stance and Spain’s momentum supportive; political uncertainty weighs on France, while Italy’s gains are likely via construction from EU funds.
Outlook for traders
– EUR rates: Activity beats with cooling services inflation strengthen the ECB-hold narrative; watch wage prints and negotiated pay for signs of persistence in cost pressures.
– FX: A sturdier services backdrop is modestly EUR‑positive versus low‑yielders, but follow‑through hinges on US data and global risk appetite.
– Equities: Cyclical and domestically oriented European names may benefit from services-led growth; manufacturing lag remains a headwind for exporters.
– Credit: A firmer growth pulse with easing price pressures is broadly supportive, though tighter financial conditions still argue for selectivity.
FAQ
What did the final eurozone PMIs show?
The Services PMI was revised up to 53.6 and the Composite PMI to 52.8, both at roughly 30‑month highs and above flash readings.
Which countries drove the upside revisions?
France and Germany saw better final readings, broadening the recovery across the bloc and lifting the composite measure.
How does this affect ECB policy expectations?
The mix of firmer activity and cooling services selling prices supports the ECB’s case to keep rates unchanged at the next meeting, while keeping a data‑dependent stance on the timing of any future easing.
What do the PMIs say about inflation pressures?
Services selling-price inflation eased again, but input costs remain elevated due to wage growth—slowing, yet still above historical norms.
Is manufacturing still a drag?
Yes. Manufacturing remains weak, but services strength more than offset factory softness in November, keeping overall output in expansion.
What’s the near-term growth outlook?
HCOB expects a slight acceleration in Q4 growth, with support from Germany’s fiscal stance and Spain’s resilience; France’s political uncertainty and Italy’s construction-focused stimulus shape the country mix.
What’s the takeaway for EUR and bond markets?
Activity surprises typically lend mild support to the euro and nudge front‑end yields higher, but durability depends on wages, inflation prints, and global risk sentiment, as BPayNews analysis notes.
