Eurozone: PMIs shows loss of momentum - BBH

Europe’s service and composite PMIs were the data highlight and the eurozone service PMI was revised to 54.9 from the 55.0 flash reading, which itself was down from 56.2 in February and 58.0 in January, points out the research team at BBH.  

Key Quotes

“The composite was also revised lower, to 55.2 from 55.3.  It peaked in January at 58.8 and fell to 57.1 in February.  While the loss of momentum is significant, the impact on GDP may be more measured.  Consider that the Q4 17 average was 56.4 and the Q1 18 average is 56.7.  We think that if the loss of momentum spills over in the start of Q2, for which some data will be available in the coming weeks, then investors may be more sensitive to it.   It could help determine in which direction the euro breaks out of its range.”

“The loss of momentum is especially evident in Germany.  Its service PMI was revised down from the flash reading as was the composite (55.1 from 55.4 flash and 57.6 in February).  It also reported disappointing factory orders.  Some recovery was expected after the 3.9% m/m drop in January.  The bounce was not even halfhearted.  Rather than rise 1.5%, as the median forecast from the Bloomberg survey, Germany reported a 0.3% increase.  And this was only marginally less disappointing because the January decline was revised to -3.5%.”

“The UK data also disappointed.  Start with new car registrations.  They fell 15.7% in March, and have not grown on a y/y basis since last March.  The average pace last year was a 7% decline.  Its services PMI fell to 51.7 from 54.5, well below expectations.  The composite similarly fell to 52.5 from 54.5.  Unlike the EMU, the UK's composite average in Q1 18 (53.5) is below the composite average for Q4 17 (55.2).”