Despite its slight fall (to 52.7), the Euro area PMI composite is still compatible with GDP growth at the tune of 0.3% q/q. Given weaker numbers from the US and from China, the drop in the manufacturing component does not come as surprise. At around 54/55 points, new orders and export orders still look okay. If we are right in expecting that weakness overseas is temporary and not a new trend, the same should be true for Europe.
The German economy seems to have a good start to the year. True, the manufacturing PMI declined by almost two points. However, it still looks healthy, also when it comes to new orders. New business expectations and business activity in services increased nicely. Combine that with the recent increase in the Ifo index for current conditions, then it looks like growth in Germany is about to accelerate from the 0.4% q/q reading in Q4.
France still gives reason to worry, as both the manufacturing and the service PMI fell. Domestic manufacturing orders fell back significantly, exports order only a bit. The good thing is that French PMIs no not have that much to do with real economic activity. Still, France is likely to see very slow growth at best in Q1. Bad news, bad also old news.
Should the ECB worry about these numbers? Worry at bit maybe, but not act. The ECB hast no weapons to fight bad weather in the US or Chinese Lunar New Year seasonal effects. And it can regret but not fight lack of momentum and reform in France.
Nordea