Based on business surveys, the cyclical environment, globally, seems to have stabilised. A similar picture emerges for the eurozone and China, whereas in the US it is mixed.

'Stability' characterises the monetary policy outlook. After the announcements in September, the ECB can afford to wait before making a judgment of the effectiveness of its policy stance. For the Federal Reserve, it seems that the bar for envisaging a change in the federal funds rate is high, even more so when it's about considering a rate hike.

Stabilisation of economic data and a stable, very accommodative monetary stance provide reasons for being hopeful, but this supposes that uncertainty doesn't increase again. In this respect, unfortunately, the situation remains very opaque. Shifting to a higher gear in terms of growth then becomes more complex.

Recent data releases confirm the signs registered one month ago of a tentative stabilisation of the global cyclical environment. For the eurozone as a whole, the European Commission's economic sentiment index, increased slightly in November and thus remains above its long-term average. This index covers industry, services, consumers, construction and retail trade. The Commission's business climate index remained stable. The purchasing managers' index (PMI) for the manufacturing sector increased further in November and is now close to the level seen in August. The services index on the other hand, declined slightly, to 51.9. Back in August, it was still at 53.5. This development has raised concerns: after a protracted decline of the manufacturing indices, one could fear that the services sector could become a major drag on growth. However, the historical record shows that when the manufacturing sentiment has stabilised, as indeed has been the case as of late, the services sector also tends to see a stabilisation.

Survey data for Germany have rebounded slightly and this has brought relief after a very long and considerable decline in the industrial sector. The PMI manufacturing has rebounded firmly from its low point reached in September and is now close to levels last seen in May. Yet, at 44.1, it remains well below 50, so the contraction continues, albeit at a slower pace. The services PMI has basically been stable in recent months, after the big drop observed in September. The ifo business climate index improved a little in November. Focussing on the expectations component, one observes a rebound in industry, services and trade. The rebound of export expectations in October, from a very low level, was short-lived: November saw a renewed weakening. In France, the business climate, after softening last year, had rebounded in the early part of the year. In recent months it has stabilised at a level well above the long term average. Labour market conditions improved further in November, which bodes well for household spending. In Italy, the manufacturing PMI has been edging down slowly to a low level of 47.6 but services dropped significantly in November (from 52.2 to 50.4). In Spain, both series improved somewhat in November but at 47.5, manufacturing remains under pressure. Services are doing better at 53.2.

 

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