Financial
markets
are
awaiting
the
“flash”
estimates
for
purchasing
managers’
indexes (PMI)
in
the
UK
and
Eurozone
on
March
21.
They
are
initial
estimates
for
the
current
month
that
are
subject
to
revision.
In
the
eurozone,
the
HCOB
Flash
Eurozone
PMI,
released
by
S&P
Global
on
Thursday,
will
provide
un
updated
snapshot
of
the
health
of
the
economy,
after
the
European
Central
Bank
revised
down
the
outlook
for
GDP
growth
in
2024,
during
its
March
meeting.
According
to
FactSet,
consensus
estimates
for
March’s
composite
index
is
49.7,
still
slightly
below
the
line
that
marks
expansion
from
contraction.
The
manufacturing
PMI
index
is
forecast
to
be
at
47,
while
the
services
PMI
is
expected
to
show
a
reading
of
50.5.
In
February,
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
from
47.9
in
January
to
an
eight-month
high
of
49.2.
Although
it
remained
in
contraction
territory,
the
eurozone
economy
showed
signs
of
stabilising
in
February.
“Although
total
output
volumes
fell
for
a
ninth
successive
month,
the
contraction
was
marginal
and
the
slowest
since
the
middle
of
last
year.
Notably,
service
providers
recorded
a
fractional
improvement
in
business
activity,
which
was
offset
by
a
further
solid
reduction
in
factory
production,”
says
S&P
in
its
note.
What
does
PMI
Data
Mean
for
Investors?
PMI
survey
provides
important
insights
for
future
ECB
interest
rate
decisions.
According
to
Cyrus
de
la
Rubia,
chief
economist
at
Hamburg
Commercial
Bank,
there
are
two
main
insights:
1)
Output
prices
in
the
services
sector
continue
to
surge
at
an
accelerated
rate,
primarily
fuelled
by
escalating
wages.
2)
The
unexpectedly
robust
pricing
power
demonstrated
by
service
providers
amid
a
sluggish
economic
climate
and
a
forecast
of
sub-1%
growth
for
2024
raises
eyebrows.
This
heightens
concerns
regarding
the
potential
emergence
of
a
wage-price
spiral
and
stagflation,
particularly
in
light
of
persistent
structural
labour
shortages
that
threaten
productivity.
“Those
advocating
late
rate
cuts
may
very
well
find
reinforcement
in
the
PMI
findings,”
adds
Cyrus
de
la
Rubia.
What
to
Expect
from
the
UK
PMI
This
week
the
PMI
data
is
in
competition
with
UK
inflation
data
and
the
Bank
of
England
rate
decision,
which
are
likely
to
grab
most
of
the
headlines.
But
the
state
of
the
economy
is
never
far
from
markets
or
politicians,
with
the
Spring
Budget
still
relatively
fresh
in
the
memory.
A
reminder:
inflation
is
expected
to
fall
back
to
2%
this
year,
according
to
the
OBR,
GDP
is
forecast
to
grow
by
0.8%
in
2024
and
then
increase
to
1.9%
next
year.
January
saw
the
UK
economy
eke
out
a
positive
reading,
following
the
fall
into
recession
at
the
end
of
2023.
Back
to
the
data
release
–
on
Thursday
S&P
Global
produces
manufacturing
and
services
PMI
data,
as
well
as
a
“composite”
number. “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.
The
PMI
data
represents
the
biggest
sections
of
the
UK
economy,
construction,
services
and
manufacturing.
Last
month
the
composite
the
index
number
was
53.8
for
services,
the
dominant
part
of
the
UK
economy,
and
47.5
for
manufacturing.
Here
50
is
the
dividing
line
between
expansion
and
contraction.
According
to
FactSet,
the
consensus
for
services
PMI
for
March
is
for
a
reading
of
53.7,
a
modest
fall
on
February,
while
the
manufacturing
PMI
is
forecast
for
47.8,
above
the
previous
month.
Signs
of
Improvement
–
in
Services
at
Least
“Both
in
the
Eurozone
and
the
UK
the
pattern
is
very
similar,
service
indicators
are
showing
signs
of
improvement,
albeit
of
a
low
base;
while
manufacturing
in
both
regions
is
struggling,”
says
Michael
Field,
European
equity
market
strategist
at
Morningstar.
“Services
activity
is
back
on
the
right
track,
having
turned
negative
in
the
middle
of
last
year.
This
is
particularly
true
for
the
UK,
with
last
month’s
number
indicating
robust
activity
in
the
space.
Manufacturing
in
both
regions
has
been
severely
hampered
by
inflation,
weak
consumer
demand,
and
high
energy
prices.
While
inflation
has
fallen
heavily
over
the
last
year,
it’s
the
latter
two
problems
that
may
take
significant
time
to
correct,”
ends
Field.
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