Eurozone PMI manufacturing dropped to 49.2 in February, down from 50.5 and missed expectation of 50.3. That’s the lowest level in 69-month. PMI services, however, rose to 52.3, up from 51.2 and beat expectation of 51.3. PMI composite improved to 51.4, up from 51.0.
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“The Eurozone economy remained close to stagnation in February. The flash PMI lifted only slightly higher during the month, continuing to indicate one of the weakest rates of expansion since 2014. The survey data suggest that GDP may struggle to rise by much more than 0.1% in the first quarter.
“Germany is on course to grow by 0.2%, buoyed by its service sector, but France looks set to stagnate or even contract very slightly. The rest of the region is meanwhile suffering its worst spell since late- 2013, with growth having slipped closer to stalling in February.
“Some uplift was also seen as companies stepped up preparations ahead of Brexit and disruptions from the ‘yellow vest’ protests in France eased. However, the general picture remained one of a more subdued business environment than seen throughout much of last year.
“Weaker order books were linked to a combination of intensifying headwinds and concerns, including global trade protectionism worries, Brexit, the downturn of the auto sector, increased political uncertainty and anxieties regarding the broader economic outlook. Rising risk aversion has consequently dampened demand, investment and spending.
“The weakness is being led by manufacturing, which has now entered its first downturn since mid- 2013. With factory order books deteriorating at an increased rate, the rate of contraction in the goodsproducing sector will likely worsen in coming months.
“Solid domestic demand in many countries, notably Germany, continued to help support service sector growth and offset the downturn of the manufacturing sector. However, the overall rate of service sector growth remained relatively moribund compared to that seen throughout much of last year.
“Price pressures have meanwhile continued to ease alongside the more subdued demand environment.”
Full release here.
On the one hand, Italy’s budget is a key focal point after EU officials basically rejected it. At the same time Deputy Prime Minister, 5-Star movement leader, Luigi Di Maio insisted today that “We are not turning back from that 2.4 percent target, that has to be clear … We will not backtrack by a millimeter.”
Sterling off low as main elements of Brexit text ready. But EU also said some key issues remain under discussion
Sterling is given a lift off today’s low after Financial Times reported that the main elements of a Brexit treaty text are ready. According to EU chief Brexit negotiator Michel Barnier, the documents could be presented to the UK cabinet on Tuesday.
However, it should be noted that it’s a “known” that the “main elements” are ready. A few weeks ago, it was like 95% completed. Now it maybe 99.9%. But it’s not done until all is done. There is so far no news regarding the Irish backstop. So the piece of news is not so much news.
Also, Barnier briefed EU ministers on negotiation progress today. The post meeting statement is rather reserved. The EU statement noted:
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The Commission’s chief Brexit negotiator, Michel Barnier, informed the EU27 ministers of the situation following negotiations with the UK over the last few weeks. Michel Barnier explained that intense negotiating efforts continue, but an agreement has not been reached yet. Some key issues remain under discussion, in particular a solution to avoid a hard border between Ireland and Northern Ireland.
“In these final stages of the negotiations, ministers showed again today that we are determined to keep the unity of the EU 27. We have reconfirmed our trust in the negotiator. And we support his efforts to continue working towards a deal.”
Gernot Blümel, Austrian Federal Minister for the EU, Art, Culture and Media
During the meeting, ministers however also recalled the need to continue the work at all levels on preparations for every possible scenario.
Full statement here.
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It doesn’t sound like there is any breakthrough.