Eurozone: PMI falls but still points to continued strong growth – Capital Economics

February’s fall in the euro-zone Composite PMI still left the index at a very high level and consistent with continued healthy growth in early 2018, according to Jessica Hinds, European Economist at Capital Economist.

Key Quotes

“The headline output index declined from January’s near 12-year high of 58.8 to 57.5, a slightly bigger drop than either we or the consensus had expected. February’s drop reflected a fall in the forward-looking new orders component, which does not bode well for March and Q1 as a whole. But with the headline output index at such a high level and currently consistent with quarterly GDP growth accelerating from Q4’s 0.6% towards 0.8%, another small fall in the PMI next month would still point to a healthy pace of growth. The euro-zone composite output price index remained elevated, suggesting that the strength of the economy is prompting some inflationary pressure.”

“The limited available country information showed that both the German and French Composite PMIs fell. But the euro-zone Composite index declined by a smaller amount, suggesting that last month’s jump in the Italian index to a 139-month high was not temporary. And in the case of Germany and France, both indices remain at a fairly high level and suggest that in both countries, quarterly GDP growth picked up from Q4’s 0.6% to around 0.7%. All in all, with the euro-zone economy continuing to perform strongly and signs of a little inflationary pressure, we expect the ECB to signal in the coming weeks that its asset purchase programme will end this year.”