EUROZONE DATA: Weak France and Germany Weigh On EZ April Flash Services PMI
The Eurozone-wide services PMI was 49.7 (vs 50.5 cons, 51.0 prior). While the miss was expected given the weaker-than-expected French and German data earlier this morning, the smaller deviation from consensus (compared to FR/GE) suggests the EZ ex-France and Germany was a little better than expected.
- We estimate the German/France composite services PMI at 48.0 (vs 49.6 prior), with the ex-German/France composite at 52.7 (vs 53.3 prior).
- The manufacturing reading was 48.7 (vs 47.4 cons, 48.6 prior). We estimate the German/France composite manufacturing PMI at 48.1 (vs 48.4 prior) and the ex-German/France composite at 49.5 (vs 48.9 prior).
- The composite EZ reading was 50.1 (vs 50.2 cons 50.9 prior), the lowest since December.
Key notes from the EZ-wide release (focusing on ex-German/France comments):
- “The rest of the Eurozone continued to record solid growth of output, albeit with the pace of expansion easing slightly from that seen in March”.
- “Companies were generally reluctant to expand output given a further reduction in new orders during April”…” New export orders (which include intra-Eurozone exports) also decreased, and at a broadly similar pace to that seen for total new business”
- “April saw a sharp drop in business confidence in the euro area”…” . The drop in confidence was widespread, both in terms of sector and geographical coverage”
- “A solid reduction in manufacturing staffing levels outweighed a modest and slower increase in workforce numbers in the service sector. Continued falls in employment in the largest two Eurozone economies cancelled out job creation elsewhere”.
- “Cost inflationary pressures waned at the start of the second quarter”…” Inflation was centred on the services sector”.
- “Selling prices were raised across both monitored sectors”.
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GILTS: Outperforming Bunds
Hard to pin down a driver for the early outperformance in gilts vs. Bunds, with UK yields 2.5-4.5bp lower on the day
- Plenty of risk events evident for UK markets this week, as detailed earlier, but little in the way of overt fresh catalysts to identify.
GERMAN DATA: March Flash PMI: Manufacturing Buoys Composite, But Services Weak
The German services PMI fell to its lowest since November at 50.2 (vs 52.0 cons, 51.1 prior), but this was slightly offset by the strongest manufacturing reading in 31 months (48.3 vs 47.0 cons, 46.5 prior). This helped the composite reading reach a 10-month high of 50.9 (vs 51.1 cons, 50.4 prior).
Despite this, the details of the PMI screen dovish – particularly for services, which accounts or ~70% of gross value added in Germany. Underlying services demand remains weak, while both input cost and output charge inflation cooled in March.
There was an uptick in confidence on hopes of a boost in infrastructure spending following the recent fiscal announcements.
Key notes from the release
- “The upturn in manufacturing was driven in large part by stronger demand in the sector, with goods producers reporting a first – albeit modest – rise in new orders since March 2022. Where an increase was recorded, some firms remarked on stronger domestic demand and clients trying to build up stocks”.
- “Services firms meanwhile recorded the steepest drop in new business in just over a year, citing a wait-and-see attitude among customers amid a backdrop of market uncertainty”.
- “March seeing a tenth successive monthly decline in employment. The rate at which workforces fell eased since February, however, reflecting a slowdown in the pace of manufacturing job shedding to the weakest in nine months. Services employment once again rose slightly”.
- “Turning to prices, March’s flash data showed a cooling of inflationary pressures across the eurozone’s largest economy. This reflected developments in the service sector, where firms reported the slowest increases in input costs and prices charged for five months”.
- “Growth expectations increased in both monitored sectors and remained stronger in manufacturing than in services. Reports from surveyed businesses highlighted positivity around a boost in infrastructure spending and hopes of a general upturn in economic conditions”.
MNI: GERMANY FLASH MARCH MANUF PMI 48.3 (FCST 47.0, FEB 46.5)
- MNI: GERMANY FLASH MARCH MANUF PMI 48.3 (FCST 47.0, FEB 46.5)
- MNI: GERMANY FLASH MARCH SVCS PMI 50.2 (FCST 52.0, FEB 51.1)
