Home News PMIs Suggest USA-EZ Divergence

PMIs Suggest USA-EZ Divergence

Stockholm (Ekonamik) – According to flash Composite Purchasing Managers Index (PMIs) estimates published by IHS-Markit, the USA and the Eurozone seem to be moving in opposite economic directions. While the US economy appears to be booming, the Eurozone is stagnating, at best.

According to the information published by the data and analytics firm, the USA recorded a Flash composite PMI level of 55.8 in February, up from 54.4 in the previous month, an 8-month high. The Eurozone on the other hand only posted a level of 51.4, a three-month high and up from 51 in January. In both cases, the services sector was the main driving force, while manufacturing dragged aggregate economic activity.

The PMI IHS-Markit is a leading indicator of economic conditions. An estimate above 50 is generally consistent with an economic expansion while measurements below that level imply an economic contraction.

- Advertisement -

“Historical comparisons suggest the latest survey data are indicative of an underlying economic growth rate of around 2.5% annualised, although the PMI is designed to monitor private sector companies so the impact of the government shutdown may not be fully captured,” commented Tim Moore, Associate Director at IHS Markit, in relation to the USA figures. “Nonetheless, relatively strong domestic business conditions mean that US manufacturers remain on a much more positive trajectory than the recent downbeat production trends signalled by IHS Markit’s Manufacturing PMI surveys across Europe and Asia,” Moore added.

“The Eurozone economy remained close to stagnation in February. The flash PMI lifted only slightly higher during the month, continuing to indicate one of the weakest rates of expansion since 2014. The survey data suggest that GDP may struggle to rise by much more than 0.1% in the first quarter,” commenting on the Eurozone, Chris Williamson, Chief Business Economist at IHS Markit added.

The aggregate Eurozone PMI reflected weakness in its two main economies. In Germany, the Composite PMI was measured at 52.7, up from 52.1 in January. Phil Smith, Principal Economist at IHS Markit, said argued that “Germany’s manufacturing and service sectors remain on very different paths, according to February’s flash PMI data. While strong fundamentals in the domestic market are driving growth in services business activity, falling exports continue to weigh on the performance of the manufacturing sector. Measured overall, the data remain indicative of a very modest rate of underlying output growth”. Chief Business Economist at IHS Markit added that “Germany is on course to grow by 0.2%, buoyed by its service sector, but France looks set to stagnate or even contract very slightly.”

The outlook for France was considerably gloomier. In France, the Composite Output was measured at 49.9 in February up from 48.2 in January. Despite the rise, the below-50 level is still indicative of an economic contraction. “Although the ‘gilets jaunes’ protests are still ongoing and panellists have suggested that these are still causing disruption, the economy showed resilience in the latest survey period. Encouragingly, the rate of job creation accelerated and new orders declined only marginally, arresting the downward momentum seen over the past couple of months. That said, the economy will continue to post below its potential as long as social unrest continues. And amid the current uncertainty in the global economy, domestic issues weighing on activity are likely to remain detrimental,” commented Eliot Kerr, Economist at IHS Markit.

Earlier estimates of Italian Services and Manufacturing PMIs are likely to weigh further on the Eurozone Economy.

The Press release on the US Composite PMI can be read here.

The Press release on the Eurozone Composite PMI can be read here.

The Press release on the German Composite PMI can be read here.

The Press release on the French Composite PMI can be read here.


Filipe Wallin Albuquerque
Filipe Wallin Albuquerque
Filipe is an economist with 8 years of experience in macroeconomic and financial analysis for the Economist Intelligence Unit, the UN World Institute for Development Economic Research, the Stockholm School of Economics and the School of Oriental and African Studies. Filipe holds a MSc in European Political Economy from the LSE and a MSc in Economics from the University of London, where he currently is a PhD candidate.

Latest articles

Thriving on Covid-19 Challenges

Stockholm (Ekonamik) - Digitalization has certainly mitigated the impact of COVID-19 on businesses, economies and personal lives. After all, digitalization offers the vital infrastructure...

The Battle of Cheap and Expensive

Stockholm (Ekonamik) - The spread of COVID-19 triggered panic among investors in the first quarter of the year and sent markets reeling and company valuations...

Denmark: A Relative Success Story or Too Soon to Tell?

Stockholm (Ekonamik) - Along with a handful of smaller European countries such as Austria and the Netherlands, Denmark is one nation that appears to...

Challenges and Opportunities in Frontier Markets

Stockhom (Ekonamik) - Given the coverage that Europe and the USA have received regarding the effects of COVID-19, it is easy to forget about...