What Europe's Economic Indicators Are Telling Us

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Macro Analyst


  • Europe's biggest economy - Germany - shows first signs of weakness in the manufacturing sector.
  • Markit Eurozone Manufacturing PMI indicates slower growth of production, new orders, export business and employment.
  • Input cost deflationary pressure remains strong and forces the ECB to take action.

As the Markit Manufacturing PMIs for February were recently published, I'd like to give a short update on these economic indicators for Europe. I follow these indicators to get a sense for the direction of the economy (see the chart below for the correlation between the PMI and the stock market).

  • Eurozone 51.2 (12-month low): Slower growth of production; new orders; export business and employment
  • Spain 54.1 (2-month low): Rate of job creation quickens to seven-month high; fastest reduction in input costs since July 2009
  • Ireland 52.9 (24-month low): Rate of input cost deflation quickened to the fastest since November 2009
  • Italy 52.2 (12-month low): Further easing in the pace of expansion in new orders; employment continued to increase
  • Austria 51.9 (4-month high): Output and new orders rise at sharper rates but employment sees only a small gain
  • Netherlands 51.7 (18-month low): Output rises at slowest pace since July 2013 and new orders stagnate
  • Germany 50.5 (15-month low): Employment falls for first time in one-and-a-half years; steepest drop in input costs since financial crisis
  • France 50.2 (2-month high): Production lowered amid further drop in new orders ; stable employment; further declines in input and output prices
  • Greece 48.4 (3-month low): The reading below 50 indicates a downturn in the manufacturing sector of Greece.

The last time the European PMI was close to the neutral 50.0 mark was in late 2014. Amongst a declining Euro and the beginning of ECB's QE, business conditions improved in the months following. The question remains whether this time business conditions will improve again and prevent the manufacturing industry from falling into contractionary territory - as it happened in 2011 and 2012. As Chris Williamson (Chief Economist at Markit) said, the ECB has to take action on its meeting next week: "With all indicators - from

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Macro Analyst profile picture
I write about economic indicators (which I trace as part of my top-down research), my view on markets and investment ideas for stocks, bonds, currencies and commodities.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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