Today, February 22nd, the Purchasing Managers Index's “preliminary” forecasts have been released. (PMI) Released in the UK and Eurozone. With the UK, like Germany, officially in recession, these datasets are being closely monitored for signs of recovery in key economic sectors such as manufacturing and services. These are original estimates for the month and are subject to revision.
Preliminary PMI survey data provided today by S&P Global shows that business activity, particularly in the euro area, fell in February to the lowest level in eight months. Stability in service sector production offset a further sharp decline in manufacturing.
The seasonally adjusted HCOB Flash Eurozone Composite PMI Production Index rose to 48.9 in February from 47.9 in January (slightly above the FacSet consensus). Here, 50 is the difference between expansion and contraction.
In a note, S&P said: “Although it signals a ninth consecutive month of production decline, February's decline was the smallest since June last year. (excluding March) will continue into 2024, but the rate of decline in the first quarter shows signs of easing.
This figure continues to vary markedly by sector across the euro area. Manufacturing production fell for the 11th consecutive month to 46.2, accelerating the decline from the slowdown in January (46.6). In contrast, business activity in the services sector stabilized at 50 (slightly higher than January) after six months of continuous deterioration.
Germany lags behind the eurozone
On a country-by-country basis, a deepening economic slowdown in Germany and a sustained decline in production in France were offset by faster growth in other regions. German production fell for the eighth consecutive month, the fastest pace since October last year. Production in France also fell, but at the slowest pace on record since the country's economic downturn began last June.
Meanwhile, other countries in the euro area reported production increases for the second consecutive month, in contrast to declines in the previous five months. This is the biggest monthly improvement since May of last year. Growth in the services sector accelerated and manufacturing remained largely stable.
Confidence also improved, reaching its highest level in 10 months. This is prompting companies to raise staffing levels at the fastest rate since July last year, suggesting the eurozone's economic slump is easing.
Will the ECB cut interest rates?
Michael Field, European market strategist at Morningstar, said today's preliminary PMIs confirmed two things.
• Expectations are low in Europe.
• The image is still mixed.
“European manufacturing PMIs declined in February. With energy prices rising and the labor market relatively tight, it is unlikely that this trend will improve significantly any time soon,” Field said. “Services PMI was more encouraging, beating economists' expectations and rising to 50 for the first time since summer 2023.”
“That said, overall the European economy remains weak and it remains to be seen whether this will lead to swift rate cuts by the ECB. But certainly there is increasing pressure on the ECB to take action on this front.” concluded Mr. Field.
UK PMI eases recession fears
Morningstar Field comments that the UK figures also follow trends in the euro area.
Britain's private sector expanded for the fourth month in a row, at the fastest pace since May last year, provisional data on Thursday suggested. In February, the index rose from 52.9 points in January to 53.3 points, the highest level in nine months. There has been a further rise around the 50-point unchanged mark, indicating a slight acceleration in the pace of expansion. This measure was higher than the market consensus of 52.9 cited by FXStreet.
Mr Field said: “Fundamentally, services have shown significant improvement, rising more than expected to 54.3 in February. Manufacturing remains below the magic 50 at a low level of 47.1, and this outlook will soon Reversal is unlikely.
The UK services PMI was unchanged from January at 54.3 points. FXStreet had expected a lower reading of 54.1.
In an S&P note, survey respondents often cited an improvement in business and consumer spending despite continued pressure on the cost of living, while others commented on the boost from easing financial conditions. are doing.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “Survey data indicates economic growth in the first quarter of 2024 will be between 0.2% and 3% quarterly, an improvement over last year's economic growth rate. “This allays concerns that the downturn will spread domestically.” It is 2024, suggesting that the UK's 'recession' is already over. ”
Will the Bank of England cut interest rates?
Mr Field said it remains to be seen whether the preliminary PMI figures mean British savers can expect interest rate cuts in the coming months, but he points out that the Bank of England has several options.
“The UK has the highest interest rates in the major developed world at 5.25%, giving the Bank of England significant room for maneuver in terms of rate cuts. , the task is by no means an easy one.”
Written by Sara Silano and additional content from Alliance News
