Euro-Area Economy Looked a Little Less Buoyant in February
The euro-area economy may have lost a little more momentum than initially estimated.
(Bloomberg) -- The euro-area economy may have lost a little more momentum than initially estimated in February, adding to signs that the pace of growth may be moving past its peak.
IHS Markit’s composite Purchasing Managers’ Index slipped to 57.1 from 58.8 in January. That’s the weakest in four months and below the flash estimate of 57.5. Separately, Sentix said on Monday that Donald Trump’s threat of tariffs on imported steel and aluminum undercut optimism among investors, with euro-area sentiment dropping to the lowest in almost a year.
The PMI report showed that Germany, the region’s largest economy, grew the least in three months, while France also cooled. Spain bucked the trend among the major economies, with the best PMI reading in eight months.
In Italy, which held national elections at the weekend, the composite PMI also declined, albeit from a 10 1/2-year high. That ballot saw anti-establishment groups surge as voters punished the mainstream parties for years of economic decline, rising taxes and a wave of immigration. Italian stocks fell, with the FTSE MIB down 1 percent at 10:57 a.m. Rome time. The euro was little changed and traded at $1.2321.
The latest euro-area economic figures follow confidence surveys in recent days that show expansion in the 19-nation region may be coming off the boil after the best year in a decade in 2017. The drop in the Sentix index was far greater than economists had anticipated and took the gauge to its weakest since April.
“Trump’s comments on punitive tariffs give investors a great deal of thought -- an economic turnaround is in the air,” said Manfred Huebner, managing director at Sentix.
The readings also come just days before the European Central Bank’s policy meeting on Thursday. While some officials have already argued in favor of advancing down the exit route, President Mario Draghi has pushed back.
“These new economic question marks reduce the pressure on the ECB to tighten its monetary policy reins -- something that Mario Draghi does not favor at the moment anyway,” Huebner said.
While the PMIs have weakened, IHS Markit noted that they remain well above the key 50 level and indicate growth is running at a quarterly pace close to 1 percent. Economists surveyed by Bloomberg see total output slowing to 2.3 percent in 2018, down from 2.5 percent in 2017.
“It’s too early to read too much into the February fall,” said Chris Williamson, IHS Markit’s chief business economist. “Some pull-back from January’s high was always on the cards.”
--With assistance from Harumi Ichikura and Mark Evans
To contact the reporter on this story: Fergal O'Brien in London at fobrien@bloomberg.net.
To contact the editors responsible for this story: Craig Stirling at cstirling1@bloomberg.net, Brian Swint, Jana Randow
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