Renewed fall in Eurozone business activity 

Eurozone business activity moved back into contraction in November, according to provisional Purchasing Managers’ Index (PMI) survey data, the second time in three months that this has been the case. Meanwhile, confidence in the outlook for output dropped to the lowest for just over a year. Companies continued to face challenges securing new orders, which decreased for the sixth month running and at a solid pace. With new business and backlogs of work falling, firms also scaled back workforce numbers, albeit only marginally. Meanwhile, rates of inflation of input costs and output prices ticked up from October, but in both cases were weaker than the average for the year-to-date.

The renewed decline in output was recorded as business activity in the service sector decreased for the first time in ten months, joining manufacturing in contraction territory. Manufacturing posted a faster pace of reduction, however, as production declined at a marked pace that was sharper than was seen in October.

Differences in performance within the euro area were again evident midway through the final quarter of the year. Germany and France each saw output decrease to larger extents than in October, with France posting the fastest fall in activity since January. On the other hand, the rest of the Eurozone continued to see business activity increase, albeit the rate of expansion was only slight and the slowest in the current 11-month sequence of growth.

The seasonally adjusted HCOB Flash Eurozone Composite PMI Output Index, based on approximately 85% of usual survey responses and compiled by S&P Global, dropped to 48.1 in November after having registered at the no-change mark of 50.0 in October. Output has now decreased in two of the past three months. Although modest, the rate of contraction in November was the most marked since January.

For the first time since the opening month of the year, both monitored sectors saw output decrease in November as services joined manufacturing in contraction. The reduction in services activity was only slight, however, and much weaker than that seen in manufacturing, where the pace of decline quickened from October. Manufacturing production has now decreased in each of the past 20 months.

Falling business activity reflected a waning demand environment. New orders decreased for the sixth month running in November and at the fastest pace in 2024 so far. Sharper reductions in new business were seen across both manufacturing and services.

In line with the picture for total new orders, new business from abroad (which includes intra-Eurozone trade) also declined to the largest extent since the end of last year. New export orders were down sharply and to a greater degree than seen for total new business.

The renewed reduction in business activity in November was accompanied by waning confidence in the year-ahead outlook. Business sentiment dropped sharply and was the lowest since September 2023. The overall loss of confidence was centred on the service sector, where optimism fell to a two-year low. Pessimism was seen in France for the first time in four-and-a-half years, while German companies were slightly more confident than in October. Meanwhile, the rest of the euro area remained strongly optimistic in the 12-month outlook for output, albeit slightly less so than in the previous month.

“One would now anticipate the ECB to come under increasing pressure to cut its base rate by more than 25 bps; current market pricing assigns a 73% probability of a 50 bps cut from European policymakers, up from approximately 55% yesterday,” said Harry Woolman, Associate at Validus Risk Management. “Consequently, the euro continues to trend lower against most major currency pairs, already surpassing September 2023 lows against the dollar in the immediate aftermath of the release. Coupled with the prospect of tariffs under a protectionist Donald Trump administration, as well as ongoing economic underperformance, we could well see EUR/USD test parity once more.”

 

Albania and Montenegro join SEPA

Both Albania and Montenegro are now part of the geographical scope of the Single Euro Payments Area (SEPA) payment schemes. Under the guidance of their respective central banks - the Bank of Albania (BoA) and the Central Bank of Montenegro (CBCG) - both Albania and Montenegro have undertaken significant efforts in aligning their national payment systems and regulations with European Union (EU) standards. Joining the SEPA geographical scope represents an important milestone for both countries on their path to EU membership.

As a result, all existing European Payments Council (EPC) payment scheme participants should be able to send or receive SEPA Credit Transfer (SCT), SEPA Instant Credit Transfer (SCT Inst) and SEPA Direct Debit (SDD) transactions to and from SCT, SCT Inst and SDD scheme participants from Albania and Montenegro as and when their financial institutions will adhere to these schemes.

The adherence of Albanian and Montenegrin financial institutions to the SEPA payment schemes, according to the EPC calendar, will be enabled starting from April 2025, while the Operational Readiness Date (ORD) for payment service providers (PSPs) from Montenegro will be communicated later by the EPC.

“Participation of Albania into the SEPA geographical scope marks a historic milestone for Albania, reflecting years of dedicated effort and unwavering commitment by the country’s institutions, financial sector, and partners to align with European standards and principles,” declared Gent Sejko, Governor of the Bank of Albania. “Inclusion in SEPA will impact the financial and economic development of Albania, contributing to its further integration with the EU market.”

“Montenegro’s accession to the SEPA marks a significant milestone in our financial integration with the European Union,” commented Irena Radović Governor of the Central bank of Montenegro. “This achievement unlocks economic opportunities, and delivers tangible benefits for households and businesses as Montenegro advances toward EU membership.”

 

US GDP forecast to outperform expectations in 2025

The world’s largest economy is forecast to outperform economist expectations again next year, according to Goldman Sachs Research. US GDP is expected to grow 2.5% on a full-year basis, compared with 1.9% for the consensus forecast of economists surveyed by Bloomberg.

“Recession fears have diminished, inflation is trending back toward 2%, and the labour market has rebalanced but remains strong,” David Mericle, chief US economist in Goldman Sachs Research, wrote in the team’s report, titled “2025 US Economic Outlook: New Policies, Similar Path.”

Three key policy changes following the Republican sweep in Washington are predicted to affect the economy:

• Tariff increases on imports from China and on autos may raise the effective tariff rate by 3 to 4 percentage points.
• Tighter policy may lower net immigration to 750,000 per year, moderately below the pre-pandemic average of 1 million per year.
• The 2017 tax cuts are expected to be fully extended instead of expiring, and there will be modest additional tax cuts. 

While the expected policy changes are significant, Mericle doesn’t anticipate that they will substantially alter the trajectory of the economy or monetary policy. Goldman Sachs Research forecasts the Federal Reserve will continue to cut the funds rate down to a terminal rate of 3.25-3.5% from today’s policy rate of 4.5-4.75%.

 

Use of AI continues trending up in UK financial services

75% of UK financial services firms are already using artificial intelligence (AI), with a further 10% planning to use AI over the next three years, according to a Bank of England and Financial Conduct Authority survey of artificial intelligence and machine learning. This is higher than the figures from the 2022 edition of the survey, which stood at 58% and 14%, respectively. Foundation models form 17% of all AI use cases, supporting anecdotal evidence for the rapid adoption of this complex type of machine learning.

A third of all AI use cases are third-party implementations. This is greater than the 17% we found in the 2022 survey and supports the view that third-party exposure will continue to increase as the complexity of models increases and outsourcing costs decrease. The top three third-party providers account for 73%, 44%, and 33% of all reported cloud, model, and data providers, respectively.

Respondents report that 55% of all AI use cases have some degree of automated decision-making, with 24% of those being semi-autonomous, i.e. while they can make a range of decisions on their own, they are designed to involve human oversight for critical or ambiguous decisions. Only 2% of use cases have fully autonomous decision-making.

Approaching half (46%) of respondent firms reported having only ‘partial understanding’ of the AI technologies they use versus 34% of firms that said they have ‘complete understanding’. This is largely due to the use of third-party models where respondent firms noted a lack of complete understanding compared to models developed internally.

The highest perceived current benefits are in data and analytical insights, anti-money laundering (AML) and combating fraud, and cybersecurity. The areas with the largest expected increase in benefits over the next three years are operational efficiency, productivity, and cost base. These findings are broadly in line with the findings from the 2022 survey. Of the top five perceived current risks, four are related to data: data privacy and protection, data quality, data security, and data bias and representativeness. The risks that are expected to increase the most over the next three years are third-party dependencies, model complexity, and embedded or ‘hidden’ models. The increase in the average perceived benefit over the next three years (21%) is greater than the increase in the average perceived risk (9%).

The largest perceived regulatory constraint to the use of AI is data protection and privacy, followed by resilience, cybersecurity and third-party rules and the FCA’s Consumer Duty. The largest perceived non-regulatory constraint is safety, security and robustness of AI models, followed by insufficient talent and access to skills.

With regards to governance and accountability, 84% of firms reported having an accountable person for their AI framework. Firms use a combination of different governance frameworks, controls and/or processes specific to AI use cases – over half of firms reported having nine or more such governance components. While 72% of firms said that their executive leadership were accountable for AI use cases, accountability is often split with most firms reporting three or more accountable persons or bodies.

 

Dun & Bradstreet debuts AI assistant for procurement and supplier risk decisions 

Dun & Bradstreet has announced the availability of D&B Ask Procurement, a genAI assistant built in collaboration with IBM that synthesises vast datasets and provides intelligent recommendations to help procurement teams make faster data-driven decisions, mitigate risks and drive efficiencies across their supplier networks.

Connected to Dun & Bradstreet’s business risk, financial, and firmographic data and insights, D&B Ask Procurement is designed to help teams query critical supplier insights, expedite analysis and reporting, and identify suppliers for engagement. Built with IBM watsonx Orchestrate and watsonx.ai technology with support from IBM Consulting, the D&B tool is an AI assistant that also leverages an agentic AI framework to provide advanced reasoning capabilities and autonomous decision-making. Using a conversational chat interface, users can expand insights to help de-risk their supply chain, increase productivity, and reduce costs.

D&B Ask Procurement comes on the heels of another recently launched genAI assistant, ChatD&B, which answers questions posed on a commercial entity within seconds, using Dun & Bradstreet’s validated data to deliver relevant and accurate output. D&B Ask Procurement is now available in North America, with other markets soon to follow.

 

RMB retains fifth place in most active global payments currencies

Swift’s RMB Tracker has shown that in October 2024, the RMB remained the fifth most active currency for global payments by value, with a share of 2.93%. Overall, RMB payment value decreased by 16.35% compared to September, while all payment currencies increased by 3.16%. Regarding international payments, excluding payments within the Eurozone, the RMB ranked sixth with a share of 2.30% in October.

The tracker uses data from live and delivered MT 103 and MT 202 - customer-initiated and institutional payments - and ISO equivalent messages exchanged on Swift. RMB’s fifth place out of all international currencies in October saw it behind the US dollar (47.04% of all global payments value), the euro (22.90%), the British pound (7.31%), and the Japanese yen (3.91%).

As a global currency in the trade finance market, based on live and delivered inter-group only MT 400 and MT 700 messages exchanged on SWIFT, RMB bounced back to second place based on value, accounting for 5.77% of October’s trade finance transactions, moving ahead of the euro (5.64%). This field remains dominated by the US dollar (82.91%).

Regarding FX spot transactions, RMB was October’s sixth most used currency for FX confirmations, falling below the Canadian dollar. The US dollar again claimed the top spot, followed by the euro, pound and yen. In terms of the top economies carrying out FX spot transactions in RMB, the UK came out on top in October (41.53%), followed by the US (14.32%), Hong Kong (9.65%), France (8.08%), and China (7.72%).