Economic Worries Grow as German PMI Hits New Low

German PMI hits a new low, EU PMI is mixed, and France impresses. Markets await ECB minutes for economic insights.

In a week marked by economic scrutiny and cautious optimism, Germany’s latest Purchasing Managers’ Index (PMI) data has sparked concerns. At the same time, the broader European Union (EU) PMI figures present a mixed picture.

German PMI Contracts Sharply in February

Amidst growing concerns over Germany’s economic health, February’s flash manufacturing PMI data plummeted to 42.3, down from 45.5, marking a significant deviation from the anticipated 46.1. This decline dashes hopes of a sustained recovery in the manufacturing sector, which had shown signs of improvement following a dip below 40 in July 2023.

Moreover, forward-looking indicators such as ‘new business’ and ‘new orders’ witnessed further deterioration, compounded by a decline in new export business. Surveyed firms cited customer reluctance to engage in transactions amidst ongoing economic uncertainty and challenging financial conditions.

While the services sector managed a modest uptick during the same period, there’s little evidence of cost pressures stemming from recent geopolitical tensions affecting shipping routes.

Economic Worries Grow as German PMI Hits New Low

EU PMI Data Mixed

While German PMI data paints a gloomy picture, the EU PMI figures offer a more nuanced perspective. Despite a slight dip in manufacturing, the composite reading surpassed expectations, buoyed by a notable improvement in the services sector, which reached the pivotal 50-mark, indicating a shift from contraction to expansion.

France, in particular, demonstrated resilience, with all three measures improving, notably in manufacturing, which rose from 43.1 to 46.8.

The market response to the euro was varied, with the currency experiencing gains against the US dollar and Japanese yen but facing downward pressure against the British pound ahead of the UK PMI data release.

Investors will closely monitor the European Central Bank (ECB) minutes from the January meeting for insights into policymakers’ views on the economic landscape and potential policy responses.

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