Eurozone: Composite PMI hits six-month high in February
February 21, 2020
Leading indicators point a slight improvement in growth dynamics in the Eurozone economy in February. The Flash Eurozone Composite Purchasing Managers’ Index (PMI), produced by IHS Markit, came in at 51.6, up from January’s 51.3 reading and marking the best result in six months. As a result, the PMI moved further above the 50threshold that distinguishes expanding business activity from contracting business activity in the Eurozone.
The details of the release revealed that a softer contraction in manufacturing activity was further supported by more positive conditions in the services sector. The manufacturing PMI jumped to closer to the crucial 50 threshold thanks to milder declines in output and new orders. Notably, supply delivery times widened in February amid the coronavirus outbreak impacting supply chains. Meanwhile, the services sector continued to outperform the manufacturing industry, with business activity gaining steam from January as the pace of expansion hit a six-month high. That said, incoming new business eased fractionally. For its part, employment growth cooled, though coupled with softer job losses in manufacturing, the combined rate of job creation picked up some pace from the previous month. Meanwhile, although firms’ expectations of future output declined, they remained well above last year’s average.
Regarding the Eurozone’s two largest economies, Germany’s composite PMI dipped amid weaker service sector activity and a less pronounced drop in manufacturing, while it rose in France on the back of sturdy growth in services, which more than offset a fall in manufacturing output.
Commenting on the release, Bert Colijn, senior Eurozone economist at ING said:
“If the impact from Covid-19 is ultimately quite mild, green shoots in manufacturing remain the most relevant story and a growth recovery can be expected over the course of the year with soft price pressures- a good outcome for an ECB on autopilot. Downside risks stemming from the virus will be closely watched though as March could see the economic impact of supply chain disruptions increase.”
Author: Javier Colato, Economist