German, EU PMI Analysis

• German PMI contracts sharply in February
• EU PMI data Mixed as France posts impressive numbers

German PMI Contracts Sharply in February

German PMI data was always going to be under the microscope this week amid weak fundamentals and comments from the Bundesbank that Germany is likely already in a recession and the data supported that view.

Flash German manufacturing PMI data for February sank to 42.3 from 45.5 but the surprise came via the fall from the lofty 46.1 expectation. The manufacturing sector has attempted a recovery since the sub-40 low in July of 2023 but the latest data for February stops that in its tracks.

In addition, forward-looking metrics like ‘new business’ and ‘new orders’ deteriorated further, with new export business also on the decline. Surveyed firms highlighted a general reluctance among customers to transact provided continued economic uncertainty and difficult financial conditions.

One bit of positive news is that the services sector saw a modest gain during the same time period and there is little evidence of cost pressures emanating from the Red Sea attacks that have forced shipping companies to reroute vessels away from the major corridor.

EU PMI Data Mixed

EU PMI data appears much better than Germany’s, with the composite reading edging forecasts despite a dip in the manufacturing print. Services witnessed a welcomed lift to hit the 50 mark – a level that typically separates contraction form expansion.

French data appeared to recover and fared much better than its German counterpart, posting improvements on all three measures with a notable rise in manufacturing from 43.1 to 46.8.

The euro’s reaction was mixed but mainly had a positive impact, seeing a move higher in EUR/USD and EUR/JPY but the Euro turned sharply lower against the pound ahead of UK PMI data at 09:30 GMT. Look out for the ECB minutes relating to the January meeting.

https://www.dailyfx.com/news/german-pmi-data-slumps-after-decent-run-broader-eu-pmi-data-mixed-20240222.html