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Euro area PMIs reveal signs of stabilisation in manufacturing, economists say

By Alexander Bueso

Date: Friday 24 Jan 2020

LONDON (ShareCast) - (Sharecast News) - Economic growth in the Eurozone failed to accelerate yet again at the start of 2020 but the worst of the downturn in manufacturing looked to have passed and business confidence across the single currency bloc notched up a 16-month high, according to the results of a key survey.
Survey compiler IHS Markit's so-called composite Purchasing Managers' Index for euro area output for January was steady versus the month before at 50.9, but below economists' forecasts for a reading of 50.2.

Despite the weaker-than-expected print on the composite measure, which tracks production from both Eurozone manufacturing and services, the former came in well ahead of what was anticipated, and in the case of Germany, PMIs for both sectors rebounded.

The euro area factory PMI rose from 46.1 in December to 47.5 for January (consensus: 46.8) and that for Germany from 43.7 to 45.2 (consensus: 44.5).

On the flip-side, the euro area services activity PMI declined from a reading of 52.8 at the end of 2019 to 52.2 in January (consensus: 52.8).

"It's still early to be sure, but it looks a little bit like a tepid rebound in the making now," said Claus Vistesen at Pantheon Macroeconomics, who also called attention to the signs in survey responses of a stabilisation in export demand.

For his part, Andrew Harker, Associate Director at IHS Markit, said: "The failure of growth to accelerate was in spite of some areas of positivity. The service sector remained in expansion, while the worst of the manufacturing downturn looks to have passed and industry appears to be moving towards stabilisation.

"France and Germany continued to grow, while business confidence across the single-currency area jumped to a 16-month high."