Today,
April
23,
“flash”
estimates
for
purchasing
managers’
indexes (PMI) in
the
UK
and
Eurozone
have
been
released.
These
data
sets
are
closely
watched
for
signs
of
recovery
in
key
economic
sectors
like
manufacturing
and
services.
They
are
initial
estimates
for
the
current
month
that
are
subject
to
revision.
The
eurozone
economy
expanded
in
April,
according
to
provisional
PMI
survey
data
provided
by
S&P
Global
today,
driven
by
strong
growth
in
the
services
sector.
The
seasonally
adjusted
HCOB
Flash
Eurozone
Composite
PMI
Output
Index
rose
from
49.9
in
March
to
51.4, much
higher
than
FacSet
consensus
of
50.8,
taking
the
eurozone
economy
over
the
line
that
marks
expansion
from
contraction.
Commenting
on
the
flash
PMI
data
and
the
service
sector
bounce,
Dr.
Cyrus
de
la
Rubia,
chief
economist
at
Hamburg
Commercial
Bank
(HCOB),
said:
“Several
factors
indicate
that
the
recovery
in
the
private
service
sector,
which
dominates
the
entire
economy,
is
poised
to
be
sustained.
Firstly,
there
has
been
a
positive
momentum
in
new
business
for
the
past
two
months,
which
translates
also
into
a
bolder
hiring
policy.
Secondly,
the
higher
increases
in
output
prices
are
not
only
a
response
to
the
faster
rise
in
input
costs
but
also
reflect
the
confidence
of
service
providers
in
setting
prices.
“Lastly,
the
recovery
is
occurring
simultaneously
in
the
two
most
significant
economies
of
the
eurozone,
Germany
and
France.
This
suggests
the
presence
of
common
factors
such
as
lower
inflation
and
higher
wages,
which
bolster
purchasing
power
and
contribute
to
the
resurgence
in
the
service
sector.”
Services
Boom,
Manufacturing
Gloom
The
main
contributor
in
the
eurozone
came
from
the
service
sector,
which
rose
for
the
third
month
in
April
after
six
months
of
decline.
HCOB
Flash
Eurozone
Services
PMI
was
52.9,
comfortably
beating
forecasts
for
a
reading
of
51.8.
But
the
Manufacturing
PMI
Output
Index
undershot
forecasts
for
a
reading
of
46.5,
coming
in
at
45.6,
and
lower
than
March’s
figure
of
46.1.
The
HCOB
chief
economist
noted
that
the
manufacturing
outlook
may
be
brighter
than
the
current
malaise
suggests.
“The
best
that
can
be
said
about
the
manufacturing
sector
in
the
eurozone
is
that
production
fell
at
the
slowest
rate
for
a
year
in
April
and
that
job
losses
have
eased
somewhat.
Otherwise,
the
picture
remains
rather
bleak,
with
new
business
continuing
to
decline
rapidly,
along
with
order
backlogs.
“Weak
demand
for
industrial
products
is
also
evident
in
the
sharp
decrease
in
the
volume
of
purchased
inputs
and
the
absence
of
a
turnaround
in
the
inventory
cycle.
Although
we
anticipate
a
recovery
in
the
manufacturing
sector
by
the
middle
of
the
year,
it’s
essential
to
consider
structural
factors
influencing
the
sector
When
Will
the
ECB
Cut
Rates?
The
European
Central
Bank
is
now
expected
to
cut
interest
rates
in
June,
although
the
global
narrative
has
shifted
once
again
on
rate
expectations,
especially
for
the
Federal
Reserve.
Markets
have
started
to
re-consider
the
possibility
of
further
rate
hikes
to
curb
inflation,
which
has
proved
stickier
than
expected
in
the
US.
In
April’s
meeting,
some
ECB
governing
council
members
had
supported
an
interest
rate
cut,
but
held
off
making
a
decision
until
upcoming
meetings.
HCOB’s
Dr.
Cyrus
de
la
Rubia
argues
that
there’s
plenty
in
the
current
economic
data
to
encourage
caution
by
the
ECB
in
cutting
rates,
but
still
thinks
that
June
will
see
the
first
cut.
“The
PMI
figures
are
poised
to
test
the
ECB’s
willingness
to
cut
interest
rates
in
June.
Accelerated
increases
in
input
costs,
likely
driven
not
only
by
higher
oil
prices
but
also,
more
concerningly,
by
higher
wages,
are
a
cause
for
scrutiny.
“Concurrently,
service
sector
companies
have
raised
their
prices
at
a
faster
rate
than
in
March,
fuelling
expectations
that
services
inflation
will
persist.
Despite
these
factors,
we
expect
the
ECB
to
cut
rates
in
June.
However,
we
doubt
that
the
central
bank
will
adopt
a
‘pragmatic
speed’,
as
suggested
by
François
Villeroy
de
Galhau
from
the
ECB.
Instead,
we
expect
a
more
cautious
approach.”
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