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PMI beats in France and Germany today come with some caveats

While services and manufacturing output improved in November, this comes after a period of sluggishness over the past four months and there are few signs that this latest rebound is going to be significant or lasting.

On the one hand, the increase in service activity could already be obsolete by the end of the month (data collected from PMI readings is through November 19) as virus restrictions start to creep in. come back to the picture.

On this front, France is perhaps less affected than Germany, so I would take this month’s improvements with a pinch of salt until there is evidence that the virus situation in Germany is not going to lead to any limitations on business activity in the weeks ahead.

In addition to this, supply and capacity constraints are still persistent and persistent across the region. This weighs on overall business confidence while keeping entry and exit costs high.

Over time, these will fuel higher inflationary pressures and, in turn, may weigh on customer demand and domestic demand in general.

So while the reads are good on paper today, that’s just what they have to offer. Details reveal that there may be tough times for Europe.

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