The PMI numbers are out and they aren’t good. The euro zone manufacturing data showed continued pressure, shattering hopes of any improvement in the sector. Instead, Markit's manufacturing purchasing manager's index (PMI) fell to a 12-month low in February as expansions in production, new orders, new export business and employment "all lost momentum."
Unemployment in the 19-country euro zone fell slightly in January but the data indicates continued slow growth in business activity and exports. According to the statistics agency, EuroStat, the unemployment rate in January was 10.3 percent in the euro zone, down from 10.4 percent in December, the lowest level since August 2011. The lowest unemployment rates were recorded in Germany (4.3 percent) and the highest in Greece (24.6 percent) and Spain (20.5 percent).
The data did little to lessen the pessimism in the euro zone's economic outlook after consumer prices fell sharply in February to minus 0.2 percent and the slump in energy prices succeeded in putting more pressure on the European Central Bank to increase its stimulus measures next week.
The euro zone manufacturing data showed continued pressure, shattering hopes of any improvement in the sector.
UK, Germany, Italy and Spain
Here are some specifics as reported in the February survey:
The rate of expansion in the UK manufacturing sector headed towards the stagnation mark. Output growth eased sharply with the slowdown reflected in the labor market where job losses registered for the second straight month. At 50.8 in February, down from 52.9 in January, the seasonally adjusted Markit/CIPS Purchasing Manager’s Index (PMI) posted its lowest reading since April 2013 – the first month of the current 35- month sequence of expansion.
Manufacturing growth in Germany slowed further in February with the final seasonally adjusted Markit/BME Germany Manufacturing Purchasing Managers’ Index (PMI) dropping from January’s 52.3 to a 15-month low of 50.5.
In Italy, manufacturing output rose at the slowest rate for over a year, reflecting a further easing in the pace of expansion in new orders. Employment continued to increase, but buying levels stagnated to end a 12-month sequence of growth.
Despite a slight slowdown in growth in February, the Spanish manufacturing sector showed a marked improvement in business conditions with the rate of job creation quickening to a seven-month high. Lower prices for oil and steel were the main factors behind an accelerated pace of decline in input costs, in turn leading firms to lower their output prices.
China
Official data on Tuesday showed that activity in China’s giant manufacturing sector shrank for a seventh straight month in February and at a faster pace than expected.
And despite the fact that its services sector did expand, it did so at the slowest pace since late 2008 and the private Caixin/Markit China Manufacturing PMI came in short of both market expectations and the previous month's reading.
Currencies
The currency markets reacted to the PMI data with the euro slipping to a one-month low while the yen continued strong after completing its best month against the dollar since 2008 and reaching its highest against the euro overnight since April 2013.
The gains came despite Japan earlier becoming the first G7 economy to sell a 10-year government bond at a negative yield, something that would usually make the currency less attractive.
Central banks saw some hope as Brent oil prices, which had been a major downward force on inflation for the last two years, hit their highest since the start of the year after their best month since August. In addition, the yields on the German Bund were able to pull out of its 10-month lows following the previous day's deeper than expected drop in euro zone consumer prices helped trigger fresh bond buying as inflation expectations hit their lowest on record.
The European Central Bank is expected to cut its deposit rate by at least another 10 basis points when it meets next Thursday and add to its 1.5 trillion euro bond buying scheme.