Great start of the year for European manufacturers

1 February, 2017

According to Markit Data, Eurozone Manufacturing PMI hit 69-month high at start of 2017. The final Eurozone manufacturing PMI came at 55.2 in January with flash reading at 55.1 and the final reading for December at 54.9. The top growth countries were: Austria, the Netherlands and Germany. What is more there is a visible intensification of price pressures. 

According to Markit, Eurozone manufacturing is off to a strong start to the year, enjoying the fastest rate of expansion for almost six years in January. Insitute says that rates of growth of new orders, exports and employment have all hit multi-year highs, with the depreciation of the euro playing a key role in helping drive new sales in exports markets. Markit adds that optimism about the year ahead has risen to the highest since the region’s debt crisis, suggesting companies are maintaining a buoyant mood despite the heightened political uncertainty caused by Brexit and looming general elections in the Netherlands, France and Germany. 

Optimism among manufacturers keeps improving despite major risk factors ahead of us, source: Markit

Markit thinks that if  current growth of manufacturing activity and the associated rise in prices is sustained, rhetoric at the ECB is likely to become more hawkish, albeit tempered with caution over the potential for political developments to cloud the outlook. According to Markit, cost inflation accelerated to a 68-month record, while average charges rose to the greatest extent in five-and-a-half years. Markit says that much of the increase in costs and prices can be linked to the weakened exchange rate and higher global commodity prices. Yet there are some signs of demand running ahead of supply, which hints at a tentative build-up of core inflationary pressures.

Data from Germany was exceptional. Manufacturing posted the strongest growth in three years. PMI rose amid steepest expansions of output and new work since early 2014. Markit says that there are signs pointing to further manufacturing growth in coming months. Firms are planning for continued improvements in demand, having raised both their purchasing activity and employment substantially in January.

EURUSD cherished better streak of data. The nearest support area around 1.077 has been re-tested and price moved higher with a massive bullish momentum. Short-term upward trend remains intact, we expect another leg higher towards a new higher high. Our recommendation on EURUSD.

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