There was a broad-based setback in euro area business surveys in February, whether in terms of country or of sector. The Flash composite PMI slipped to 57.5 in February from 58.8 in January. The month-to-month dip was the biggest since 2014.
National business surveys painted a similar picture. In Germany, the Ifo business climate index dropped by 2.2 points to 115.4 in February, from an all-time high of 117.6 in January. A pullback was expected albeit not that strong. The index suffered from both the weaker business assessment (-1.5 points to 126.3) and a noticeable 2.9 point decline in business expectations to 105.4 in February. This was the third consecutive month-on-month decline in German business expectations and the largest monthly fall in two years. All sectors registered a decline. In France, the Insee business sentiment indicator edged down by 1.7 points to 109.1 for the second consecutive month. However, the index level remains close to its 2011 peak (109.7) and above its long-term mean (100).
| In spite of the drop in February, euro area business surveys are still at very high levels and are signalling continued economic expansion. Q1 2018 growth should remain solid. But the fall in some forward-looking subindices, in particular PMI new orders, new export orders and Ifo business expectations, is consistent with our own forecast for a gradual slowdown in the quarterly pace of GDP growth to around 2% (annualised rate) by end2018. Still, February surveys confirm that growth is improving in terms of quality, with job creation and investment continuing to improve. |
Euro Area: Markit Manufacturing PMI – New Export Orders, 1999 - 2018 - Click to enlarge |
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