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Euro area flash services PMI index rises above expectations in February, manufacturing index falls sharply

Euro area’s purchasing managers’ index for the service sector rose surprisingly in February. The unexpected rise gives hope that the underlying pace of growth did not decelerate further in the first quarter of 2019. Nevertheless, the renewed sharp fall in the purchasing managers’ index for manufacturing also indicates that the euro area economy is deeply divided, noted Commerzbank in a research report.

The preliminary PMI index for services sector rose 1.1 points to 52.3 in February, as compared with consensus expectations of 51.3. The index rose by 2.1 points in Germany to 55.1. The index in France rose to 49.8 from 47.8. On the contrary, the purchasing managers’ index for the manufacturing sector for euro area dropped to 49.2 from 50.5. Consensus expectations were for 50.3.

The data released today give hope that the underlying growth rate in the euro area did not decelerate further in the initial quarter of the New Year. However, the continued fall in the purchasing managers’ index for the manufacturing sector indicates that the soft phase in this sector is continuing.

It is becoming quite evident that this is not mainly because of the issues with the new emission test procedure. Taking a look at the incoming orders in the German automotive industry indicates that they have now greatly been overcome. Contrastingly, the headwind from foreign trade appears to have gained even more strength.

“We stand by our assessment that the euro zone economy will avoid a recession due to the very expansionary monetary policy. On the other hand, we do not expect a rapid recovery in view of the downturn in manufacturing. Our growth forecast of 1.4 percent for 2019 remains subject to downside risks”, added Commerzbank.

At 14:00 GMT the FxWirePro's Hourly Strength Index of Euro was slightly bullish at 63.2672, while the FxWirePro's Hourly Strength Index of US Dollar was bearish at -79.6253more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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