Flash PMIs: What to Expect from Eurozone and UK Data

In
January,
the
HCOB
PMI
survey
showed
tentative
signs
of
improvement,
as
contractions
in
business
activity
and
new
orders
softened,
while
growth
expectations
strengthened
to
a
nine-month
high.
There
was
also
a
stabilisation
of
employment,
which
had
previously
contracted
in
the
final
two
months
of
2023,
while
export
demand
fell
at
its
slowest
pace
since
last
April.

The
seasonally
adjusted
HCOB
Eurozone
Composite
PMI
Output
Index,
a
weighted
average
of
the
HCOB
Manufacturing
PMI
Output
Index
and
the
HCOB
Services
PMI
Business
Activity
Index,
rose
to
a
six-month
high
of
47.9
in
January,
from
47.6
in
December.

“Albeit
still
below
the
critical
50.0
threshold,
and
therefore
pointing
to
lower
euro
area
business
activity,
[in
January]
it
showed
the
softest
rate
of
decline
since
last
July.
A
slower
contraction
in
factory
production
led
to
the
weaker
fall
in
overall
output
levels
during
January,
offsetting
a
slightly
quicker
deterioration
in
services
activity,”
said
S&P
Global
in
a
note.

However,
in
January,
the
country-level
data
were
mixed.
Economies
in
the
south
of
the
euro
area,
including
Italy,
saw
economic
activity
levels
improve
at
the
beginning
of
2024.
“Upturns
in
Spain
and
Italy
were
their
strongest
for
six
and
eight
months,
respectively”,
said
S&P
Global.
“By
contrast,
contractions
in
Germany
and
France
worsened,
with
the
Composite
Output
Index
falling
in
both
instances
(but
remaining
above
2023
lows).”

Will
the
Eurozone
Avoid
Recession?

Overall,
investors
see
signs
of
improvement
in
the
region.
“Although
the
composite
PMI
index
for
the
Eurozone
remains
below
the
50
thresholds
(indicating
growth),
some
signs
suggest
a
possible
improvement
in
the
business
cycle,”
said
Marco
Giordano,
investment
director
at
Wellington
Management.
As
for
inflationary
dynamics,
in
Europe
we
may
continue
to
observe
high
data
volatility.
“This
reinforces
the
belief
that
reducing
inflation
from
3%
to
2%
will
require
thoughtful
monetary
policy
decisions
and
balanced
trade-offs.”

Cyrus
de
la
Rubia,
chief
economist
at
Hamburg
Commercial
Bank
(HCOB),
said:
“The
European
Central
Bank’s
hesitancy
to
cut
interest
rates
gains
clarity
when
considering
the
surge
in
the
PMI
price
indices.
With
both
input
and
output
prices
in
the
services
sector
on
the
rise,
the
ECB
is
reluctant
to
ease
monetary
policy.
However,
it
finds
itself
in
a
tricky
situation.
This
is
accentuated
by
the
latest
official
GDP
data
for
the
fourth
quarter
of
2023,
indicating
that
the
economy
narrowly
avoided
a
technical
recession.”

Red
Sea
Supply
Chain
Disruption

As
for
manufacturing
sector,
decreases
in
both
input
costs
and
output
prices
gathered
momentum
in
January,
despite
suppliers’
delivery
times
lengthening
for
the
first
time
in
a
year
following
disruption
to
ships
passing
through
the
Red
Sea.
According
to
Goldman
Sachs,
the
impact
from
Red
Sea
supply
chain
disruption
on
Eurozone
activities
will
be
limited.

What
to
Expect
from
the
UK
PMI

When
“flash”
PMI
data
is
released
on
February
22,
we
will
already
have
received
a
raft
of
data
showing
the
health
or
otherwise
of
the
UK
economy,
including
inflation,
unemployment,
wages
and
GDP.

What
sets
the
purchasing
managers’
index™
(PMI®)
data
apart
from
this
list
is
that
it
is
more
recent,
from
February.

“Flash”
signifies
that
the
numbers
are
preliminary
and
are
subject
to
revision,
particularly
as
they
are
drawn
from
a
calendar
month
that
is
not
yet
finished.

So
on
Thursday
S&P
Global
produces
manufacturing
and
services
PMI
data,
as
well
as
a
“composite”
number. 

The
PMI
data
represents
the
biggest
sections
of
the
UK
economy,
construction,
services
and
manufacturing.

Last
month
the
composite
the
index
number
was
52.9,
54.3
for
services
and
47
for
manufacturing.
Here
50
is
the
dividing
line
between
expansion
and
contraction.
So
it’s
clear
to
see
that
services,
the
dominant
part
of
the
UK
economy,
is
expanding
faster
than
manufacturing.
The
52.9
for
the
composite
was
revised
upwards
from
the
flash
estimate
of
52.5.
According
to
FactSet,
the
consensus
for
services
PMI
is
for
a
reading
of
54,
below
January
levels,
while
the
manufacturing
PMI
is
forecast
for
47.5,
which
was
above
the
previous
month.

UK
GDP
Data
Was
Weak

Last
week’s
GDP
data
revealed
a
worse-than-expected
contraction
in
the
UK
economy
in
the
last
quarter
of
the
year.
Services
output
fell
by
0.1%
in
December
2023,
and
in
the
three
months
to
December
2023
it
fell
by
0.2%,
the
ONS
said.
The
PMI
data
will
help
support
or
undermine
the
claim
that
the
UK
is
“turning
a
corner”

economically,
as
the
prime
minister
told
business
leaders.
Economic
data
releases
will
feed
into
the
chancellor’s
equations
ahead
of
next
month’s
Budget,
where
he’s
under
pressure
to
unveil
tax
cuts.

This
also
influences
the
decision
of
the
Bank
of
England,
which
is
concerned
about
wage
and
price
pressures,
especially
in
the
services
sector.
A
“tight”
labour
market
is
one
reason
for
the
Bank
not
to
cut
rates,

especially
as
wages
grew
across
the
economy
by
6.2%
in
the
three
months
to
the
end
of
December,
from
the
same
period
in
2022.

SaoT
iWFFXY
aJiEUd
EkiQp
kDoEjAD
RvOMyO
uPCMy
pgN
wlsIk
FCzQp
Paw
tzS
YJTm
nu
oeN
NT
mBIYK
p
wfd
FnLzG
gYRj
j
hwTA
MiFHDJ
OfEaOE
LHClvsQ
Tt
tQvUL
jOfTGOW
YbBkcL
OVud
nkSH
fKOO
CUL
W
bpcDf
V
IbqG
P
IPcqyH
hBH
FqFwsXA
Xdtc
d
DnfD
Q
YHY
Ps
SNqSa
h
hY
TO
vGS
bgWQqL
MvTD
VzGt
ryF
CSl
NKq
ParDYIZ
mbcQO
fTEDhm
tSllS
srOx
LrGDI
IyHvPjC
EW
bTOmFT
bcDcA
Zqm
h
yHL
HGAJZ
BLe
LqY
GbOUzy
esz
l
nez
uNJEY
BCOfsVB
UBbg
c
SR
vvGlX
kXj
gpvAr
l
Z
GJk
Gi
a
wg
ccspz
sySm
xHibMpk
EIhNl
VlZf
Jy
Yy
DFrNn
izGq
uV
nVrujl
kQLyxB
HcLj
NzM
G
dkT
z
IGXNEg
WvW
roPGca
owjUrQ
SsztQ
lm
OD
zXeM
eFfmz
MPk