The UK's services sector has shown resilience, expanding at its fastest pace in eight months, while France's private sector has slipped into contraction. The S&P Global UK Services purchasing managers' index (PMI) rose to 54.3 in January, up from 53.4 in December, indicating growth for the third consecutive month. In stark contrast, France's HCOB composite output index fell to 47.4 in September 2024, down from 53.1 in August, signaling a contraction as it dropped below the critical 50.0 mark. This downturn in France is attributed to a significant decline in manufacturing output and a slip in the services sector, exacerbated by a drop in customer numbers following the Olympics. Total new orders in France fell at the fastest pace since June, and new export business has declined for over two-and-a-half years, leading to deepening backlogs of work. Despite the contraction, business confidence improved slightly, and employment saw a minor increase, particularly in the services sector. Input price inflation eased to a 46-month low, prompting firms to offer discounts for the first time since February 2021. Economist Tariq Kamal Chaudhry predicts near stagnation for Q3 2024 in France.
Meanwhile, the US services sector has expanded at its fastest pace since February 2023, with the ISM index of services rising 3.4 points to 54.9 in September 2024. This growth is supported by a significant increase in new orders, which rose 6.4 points, marking the highest level since early 2023. Twelve industries reported growth, led by real estate and accommodation services. However, the services employment gauge fell to 48.1, indicating a pullback in hiring. Prices paid for materials also rose to 59.4, the highest since January, reflecting ongoing inflationary pressures. Companies are reportedly building stockpiles in anticipation of potential dockworker strikes, which could impact supply chains. [29f3a82e]
In Germany, the services sector is also experiencing challenges, with its PMI reaching a five-month low. These contrasting performances highlight the diverging economic trajectories of the UK, France, Germany, and the US. While the UK's services sector is showing signs of strength and expansion, France and Germany are grappling with economic difficulties, which could have implications for the overall performance of the eurozone.
Research from Allianz Trade indicates that about 15% of small and medium-sized enterprises in the UK are at risk of defaulting on their debts over the next four years, higher than France at 14%, Italy at 9%, and Germany at 7%. Allianz Trade predicts that more than 7,000 firms will go bankrupt in the UK in 2024. The UK slipped into a recession at the end of last year, and Prime Minister Rishi Sunak is under pressure to boost growth. However, with inflation above target and interest rates at their highest since 2008, businesses are feeling the strain. Allianz Trade warns of a rise in global business insolvencies, with a 9% increase expected this year and the largest spikes predicted in the US, Spain, and the Netherlands in 2024.
In New Zealand, the PMI has been notably low, and JMI Wealth Director Andrew Kelleher has compared the recent data to the Global Financial Crisis (GFC). [341bf265] [59dac81c]