In the February 20th edition of TFTD, we highlighted the Philly Fed and Empire Fed manufacturing numbers, looking at shared and underlying dynamics to discern what may be coming down the pipe. This past week, the publishing of Markit’s Manufacturing, Services, and Composite PMIs for a whole host of countries gave us a similar opportunity to compare and contrast, to dig into the meat of what’s going on in Europe. This also helps us build on themes we’ve discussed in previous TFTDs, including Energy Prices, Wages, and tangentially, the Italian elections and populism. Below are some highlights from the releases.
In manufacturing, the overall Eurozone is rosy:
“National PMI data also highlighted the broad-base of the upturn, with expansions seen in all of the countries covered. Growth was led by the Netherlands (survey record expansion), Germany and Austria. Although rates of increase eased in the latter two, and also in France, Italy and Ireland, growth was robust across the board. Spain and Greece both saw faster expansions, with Greece registering its best pace of improvement for 18 years.”
Overall dynamics may be affected by euro strength:
“There are signs, however, that growth could cool further in coming months. A slowdown in growth of new export [including intra-eurozone] order inflows to an 11-month low suggests that the appreciation of the euro may be starting to curb export sales.”
And
“In terms of prices, the stronger euro appears to be helping bring down imported inflation, but widespread cases of demand exceeding supply highlight the ongoing presence of solid underlying core inflationary pressures.”
In services, the theme of wage and energy based price pressures emerged. From the German Services PMI,
“[T]here were also signs of labour market tightness, with the survey indicating upward pressure on salaries and finding evidence of firms being unable to source suitable workers”
In France,
“service sector firms reported a further marked rise in input costs, albeit to a weaker extent than January’s 80-month high. Among those reporting an increase, panelists often commented on higher wage bills and rising energy prices.”
And in Italy,
“Fuel prices and employment-related costs were noted as the primary drivers of inflation in February.”
Finally, from the Eurozone Composite,
“So far this year, the PMI is indicating that the eurozone is on course for the strongest quarterly expansion for 12 years, consistent with GDP rising at a buoyant quarterly rate of 0.8-0.9%. The upturn also remains as broad as it is strong” with Germany, Italy, France, and Spain all growing notably.
