“Economy Failed To Pick Up” But European PMIs Suggest Signs Of Stabilization

“Economy Failed To Pick Up” But European PMIs Suggest Signs Of Stabilization

European business activity failed to ignite growth momentum to the upside at the start of 2020 – despite regional equities ramping to near all-time-highs with the expectation of V-shape growth. Services, which buoyed the broader economy from tilting into a recession, are beginning to weaken as a manufacturing recession continues to drag on the overall economy.

IHS Markit’s Euro Zone Composite Flash Purchasing Managers’ Index (PMI) was unchanged at 50.9 in January, missing expectations of 51.2 – suggesting growth momentum to the upside is still missing.

“While the year may have changed, the performance of the eurozone economy was a familiar one in January. Output growth was unchanged from the modest pace seen in December, signaling that the economy failed again to record a pick-up in growth momentum,” said Andrew Harker, associate director at IHS Markit.

The service sector slowed at the start of the year, indicating the continued contraction in manufacturing production could be transmitting weakness into consumers. The manufacturing PMI has been stuck in a contraction for 12 months, printing at 47.8, a slight improvement from December’s 46.3 – a sign of stabilization but nothing to cheer about at the moment.

The Flash Eurozone Manufacturing PMI Output Index increased to 47.5 from 46.1, the highest since August.

Signs of stabilization at the start of the year are visible in Europe but far from the expectations of a V-shape recovery that regional equity markets priced in over the last four months. Confidence among European business leaders has marginally improved as central banks across the world slash interest rates 80 times over the previous 12 months and print more than $1 trillion in the last quarter – with the hopes of troughing the global economy and unleashing a V-shape recovery.

Tyler Durden

Fri, 01/24/2020 – 08:55

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Author: Tyler Durden