Summary: 6th January 2020

We have updated our Q4 2019 nowcasts today following the publication of December's PMI surveys. Overall, we found little significant change across the eurozone from our last nowcast review, although some data revisions have helped push up the UK into a slightly more positive position.

According to our dynamic factor model, the eurozone will grow by approximately 0.1% in the fourth quarter. This would mark a slowdown since the third quarter (0.2%) and the weakest quarterly economic expansion for almost six years. While fresh signs of manufacturing malaise were seen from the December PMI numbers, there was some lift from the service sector, helping the Composite Output Index to reach a four-month high. Indeed, if this momentum can carry into the new year then prospects should be brighter for the first quarter of 2020.

National performances across the euro area still vastly differ, however. France continues to boast resilience, with no signs that the current strike, which is reportedly the longest since the 1960s, impacted economic activity in December. Our model currently predicts growth of 0.42% for the French economy in the fourth quarter.

Meanwhile, contraction risks for Germany, which we have highlighted since the beginning of the fourth quarter nowcast cycle, remain stubbornly high. Our latest nowcast puts Germany on course for a GDP decline of -0.19%. However, November industrial production data due next week could have an instrumental impact on our model's final fourth quarter prediction. November Manufacturing PMI data for Germany showed a slight easing of downward pressures, so any upside surprise in the official statistics would pull our nowcast higher.

Italy concludes our nowcast update for the euro area, with our latest estimate showing a marginal improvement from last time out. Overall, our dynamic factor model anticipates a quarterly expansion of 0.09%.

As for the UK, increases in PMI figures from flash to final, as well as upward revisions in official data, have generated some mild pick-up for our fourth quarter nowcast. Our model predicts that the UK economy grew by 0.09% in the final quarter of 2019.

Next Nowcast Update: January 15th 2020

Joe Hayes, Economist, IHS Markit
Tel: +44 1491 461006
joseph.hayes@ihsmarkit.com

Paul Smith, Director, IHS Markit
Tel: +44 1491 461038
paul.smith@ihsmarkit.com

© 2020, IHS Markit Inc. All rights reserved. Reproduction in whole or in part without permission is prohibited.

Posted 06 January 2020 by Joe Hayes, Principal Economist, S&P Global Market Intelligence and

Paul Smith, Ph.D., Director, Economic Indices, S&P Global Market Intelligence

Purchasing Managers' Index™ (PMI™) data are compiled by IHS Markit for more than 40 economies worldwide. The monthly data are derived from surveys of senior executives at private sector companies, and are available only via subscription. The PMI dataset features a headline number, which indicates the overall health of an economy, and sub-indices, which provide insights into other key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories. The PMI data are used by financial and corporate professionals to better understand where economies and markets are headed, and to uncover opportunities.

Learn more about PMI data

Request a demo

This article was published by S&P Global Market Intelligence and not by S&P Global Ratings, which is a separately managed division of S&P Global.