Recent business surveys such as the purchasing managers’ indices, point towards a broad-based stabilisation in October. This is a welcome development after a prolonged downward trend. However, in a historical perspective, the recent readings are low or, looking at the manufacturing sector, very low. This points to an ongoing subdued growth environment. Going forward, a sideways movement of these surveys should increase the likelihood of a growth acceleration: when the frequency of bad news drops, confidence should eventually rebound, fuelling spending, all the more so given the very accommodative financial and monetary conditions.
When on holidays, it has been raining for days in row, the mere decline in intensity of the rainfall will be met with relief, triggering hope that sunshine is about to arrive. One would almost forget that, when rushing outside without an umbrella, you will still get wet. It is useful to keep this metaphor in mind when analysing the business survey data for October.
