Surveys Give Hope On Eurozone Growth

12 March, 2019

The latest business surveys, measuring activity in the manufacturing and services sector for the eurozone painted a mixed picture. The overall outlook, however, was one that gave hope of a revival in growth for the region.

Last week, IHS Markit released the manufacturing and services PMI numbers for February. It was a mixed bag, with manufacturing activity staying weak, but services activity showing a strong rebound.

As a result, the IHS Markit’s eurozone composite PMI rose to 51.9 in February. This was a higher than expected reading after preliminary results showed that the composite PMI rose to 51.4.

In January, the composite PMI came in at 51.0. Most of the gains in the composite PMI came from increased activity in the services sector.

Eurozone Manufacturing Contracts

Manufacturing activity in the eurozone reversed course for the first time in 5 years. This comes as trade war concerns, global growth slowdown, and Brexit remain the largest risks to growth in the eurozone.

Data from IHS Markit covering the manufacturing activity for February showed a downbeat report signaling a slowdown in Germany. Europe’s largest economy seemed to drag down the growth for the entire economic bloc.

The slowdown comes as ECB officials weigh the prospects of relaunching further easing measures to shore up stimulus. It comes just under two months after the central bank ended its 2.6 trillion euro quantitative easing stimulus program.

IHS Markit’s February manufacturing PMI report released just under two weeks ago showed that activity fell to 49.3 in February. This is in comparison to January’s reading of 50.5. A result above 50 on the PMI indicates expansion in the sector.

With February’s PMI activity falling to 49.3, it signaled that the eurozone’s manufacturing activity was contracting.

Earlier, data from Germany showed that factory growth had contracted for the second consecutive month. Meanwhile, activity in other major economies such as France and Spain showed that activity slowed. Spain’s manufacturing sector fell below the 50-level for the first time in nearly five years.

Chris Williamson, the chief business economist for IHS Markit, claimed the manufacturing sector in the eurozone was at its steepest decline in nearly six years. He explained that forward-looking indicators suggest that there could be further downside risks as the economy moves into the second quarter of the year.

Data revealed that the new orders index also fell at the fastest pace in six years. This is while a backlog of works was being completed. Purchase of raw materials remained weak and so did hiring as a result.

Given the downbeat data, optimism hit the lowest levels since IHS Markit started keeping records in July 2012. The future output index fell from January’s 57.4 to 56.7 in February.

Williamson said:

“In addition to widespread trade war worries, often linked to U.S. tariffs, and concerns regarding the outlook for the global economy, companies report that heightened political uncertainty, including Brexit, is hitting demand and driving increased risk aversion.”

Eurozone Services PMI Rebounds

Activity in the services sector rose to a three month high in February. The increase came amid a broad recovery across the various member states. This was on account of improved demand and gains in employment.

Data from IHS Markit shows that the eurozone’s services PMI increased to 52.8 in February. This was up from January’s 51.2. The data also beat the preliminary estimates which forecast a modest increase to 52.3.

Growth in new orders in the services sector put pressures on capacity and employment. As a result, there was an increased demand for labor. This also saw wages turning higher in some cases acoording to the firms that participated in the survey.

Output costs also increased in order to protect margins. And, as a result, business confidence rose to a four-month high. Almost all major economies in the eurozone registered a solid increase in the services sector. In fact, Spain was the only exception.

Source link  
Dollar Steady Ahead Of FOMC Meeting

The US dollar, which was trading subdued the past few days held steady ahead of the FOMC meeting today. The Fed will be releasing its economic...

Market Sentiment Turns Cautious

A number of ongoing global narratives kept a lid on the markets with USD trading subdued ahead of major events this week. These include the two-day...

Gold Maintains Gains on Brexit Uncertainty

Economic reports from the UK showed that the GDP rose 0.2% in the three months to January. On a quarterly basis, the economy picked up the pace, rising 0.5%...

US Payrolls Dent Dollar Gains

The U.S. dollar weakened on Friday amid the jobs report which dented the market sentiment which was already turning sour. Concerns of a global...

Halting Balance Sheet Reduction

The U.S. Federal Reserve released the meeting minutes from the monetary policy meeting from early January. The central bank's minutes showed...

Sweden's Riksbank Signals

The Swedish central bank held its monetary policy meeting last week where it left the key interest rates unchanged at -0.25 percent. The central bank...

Gold Prices Soar

The yellow metal has exploded higher over the last 12 hours as a combination of factors joined forces to fuel a surge in demand. Firstly, there is increased...

UK 2018 GDP Falls To The Slowest Pace

Britain economic growth slowed sharply in the fourth quarter of 2018. The yearly growth was the slowest in six years, as Brexit worries...

New Zealand Dairy And PPI

Coming up during the Asians session, we have a couple of pieces of New Zealand macro data that could generate some waves in the...

In the past 24 hours Bitcoin has lost -0.3% and reached $4022.78681177. Open your trading account with the best cryptocurrency brokers on special terms today.

In the past 7 days the EUR/USD pair has gained 0.9409% and is now at $1.1429. Start trading and making money on Forex today.

In the past 7 days Ethereum has lost -3.13% and is now at $137.517379279. Have the most popular cryptocurrencies compared online 24/7.

Top Brokers offering Forex Market Analysis

Forex Currencies Forecasts

Top 10 Forex Brokers 2019

# Broker Review
5FIBO GroupFIBO Group85%