Early Monday, December 2, the November manufacturing figures from Europe were released. In last week’s “European Opportunities” blog, I put forth evidence that core and periphery European economies are in the midst of a growth recovery from the 2011/2012 recession. This morning’s manufacturing figures only strengthen the case for accelerating growth in the eurozone.
As the perma-bear and bubble seeker crowd intensifies its message, I offer pure evidence in the hope that investors can remain focused on the reality of the recovery. Keep in mind, the ECB’s rate cut during the first week of November did not materially impact these figures. The positive contribution from that rate cut should be evident in the coming months.
Credit agencies are also responding to Europe’s economic recovery. Moody’s lifted Greece’s credit rating two notches last week. Earlier in November, credit agencies raised Spain’s and Portugal’s outlooks while lifting the grade for Cyprus.
However, manufacturing did contract in Spain during November, to 48.6 from October’s 50.9. Investors that have aligned European strategies over the past few months toward an economic recovery in Spain have certainly been rewarded. In Q3, the Spanish economy actually posted its first positive GDP print since Q1 2011. Given this morning’s weak Spanish reading, investors should reduce allocations to risk assets in Spain and further increase allocations to German, United Kingdom, and Swiss risk assets. France remains a “no touch” despite a modest lift in its November manufacturing reading.
November Eurozone PMI Manufacturing
- Germany rises to 52.7, above October’s 52.5 and consensus estimate of 52.5
- Overall eurozone rises to 51.6, above October’s 51.5 and consensus estimate of 51.5
- U.K. rises to 58.4, well above October’s 56.0 and consensus estimate of 56.1
- Italy rises to 51.4, above October’s 50.7 and consensus estimate of 50.8
- Switzerland rises to 56.0, well above October’s 52.0 and consensus estimate of 53.6
- France rises to 48.4, above October’s 47.8 and consensus estimate of 47.8
- Hungary rises to 52.6 from October’s 51.0
- Poland 54.4; Czech Republic 55.4; Greece 49.2; Ireland 52.4
Figure 1 United Kingdom PMI Manufacturing, December 2010 to Present
Figure 2 Germany PMI Manufacturing, December 2010 to Present
Figure 3 Eurozone PMI Manufacturing, December 2010 to Present