Euroland purchasing manager indices: Industry brakes and surveys point to ongoing muted growth

On balance, the sentiment amongst European purchasing managers has brightened slightly in February. The Composite Index rose from 51.0 to 51.4 points, which in the wake of the latest falls corresponds to the highest level in three months. The improvement can be attributed solely to the service sector, where the sentiment barometer rose. The yardstick for manufacturing lost ground, by contrast, and at 49.2 points it is not only below the growth threshold of 50, but also the lowest figure in five years and eight months. Production decreases, dwindling demand and declining export business are all impairing sector sentiment. Judging by the survey results, the Euroland upturn should continue although the growth rates will presumably remain muted.

The preliminary figures released on February sentiment among German purchasing managers painted a mixed picture. The Composite Index for Germany edged up from 52.1 points in January to 52.7 in February. However, this figure also entailed sharp divergence between the two sectors. While the tally improved for the service economy and rose to the highest level in five months, the level for manufacturing dropped to its lowest figure in six years and two months, and at 47.6 points was below the growth threshold of 50. Declining orders and dwindling output were the decisive factors, here. Purchasing managers reported falling demand in the automobile sector and from Asia, presumably on account of the trade disputes. Overall, German service providers seem to be profiting from robust domestic demand, while industry is feeling the pinch of a weaker global economy and of global risks.

The overall Composite Index in France rose from 48.2 to 49.9 points in February and thus suggested the macroeconomic trend was steadying, having in the prior two months been well below the neutral 50-point mark. In sectoral terms, service providers saw only a minor dip in business activities. The corresponding figure improved appreciably and fell only just short of the expansion threshold. Some of the purchasing managers polled continued to mention ongoing disturbance to business by the “Yellow Vest” protests. Sentiment in manufacturing has meanwhile largely stabilised: Growing order books – for the first time in four months – offset the negative impacts of the protests.

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