According to Markit, the German Flash Manufacturing PMI Index has sizably increased in November, which is good news for the German economy as well as for the entire Eurozone.
Nevertheless, the business activity continues to be subdued, and the threat from a potential recession is not yet entirely removed.
The index has increased to 43.8 points in November from the recorded 42.1 points the month before. The initial expectations were only for 42.9 points; however, the German economy has been able to exceed those forecasts with almost a whole per cent.
German Manufacturing Flash PMI. Image source: TradingEconomics.com
This is the third consecutive month of the observed improvement in the index, which has recorded its most robust performance since June of the same year. In the economic report, it was further stated that:
“Latest PMI data pointed to sustained weakness in the underlying trend in German business activity during November. […] Manufacturing remained the main area of weakness in November. That said, the sector’s drag on overall output continued to ease as the rate of decline in factory production slowed for the second month running to the weakest since August.”
Despite the observed marginal improvement in German manufacturing, the economy continues to be going through a soft patch of muted growth and subdued industrial output.
An examination of the most recent trends in German Manufacturing PMI data seems to confirm the line of argument of Christine Lagarde regarding the most recent developments in global markets.
“[...] there are also changes of a more structural nature. We are starting to see a global shift – driven mainly by emerging markets – from external demand to domestic demand, from investment to consumption and from manufacturing to services.”
The European economy as a whole continues to be suffering from subdued industrial growth, which can be fixed with the implementation of the structural changes which were alluded to by Lagarde in her broader speech.
Meanwhile, the short-term momentum of the German DAX index has just turned bearish, after the recent bearish convergence of the 5-day and 8-day MAs as the price is currently trading below the two.
The price seems ready to form the fourth corrective wave in a classic Elliott formation, which is going to be a small part in the broader fifth impulse wave of a super-cycle.
The price is likely to tumble to the 23.6 per cent Fibonacci retracement level before it finds support there at 12640
DAX 1D Price Chart. Image source: Trendsharks ©, created with TradingView.com
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