Daily Briefing 2/21/25
National PMIs (SPG)
The latest HCOB Flash PMI data for February indicates that the Eurozone's private sector maintained marginal growth, with the Composite PMI Output Index steady at 50.2, unchanged from January. The Services PMI Business Activity Index registered at 50.7, down from 51.3 in January, reflecting the weakest growth in three months. Conversely, the Manufacturing PMI Output Index rose to 48.7 from 47.1, marking a nine-month high, although remaining in contraction territory. Germany’s PMI data shows a slight growth acceleration, with the Composite PMI rising to 51.0, its highest in nine months. However, manufacturing employment slipped and growth expectations were revised down.
Interpretation
The latest PMI data from the Eurozone and Germany indicate more seasonal patterns though in some places there has been significant deterioration, enough to break the seasonality across the region. The Eurozone Composite PMI remained steady at 50.2 remained, unchanged from January. However, the continued contraction in manufacturing production is becoming alarming, marking the twenty-third consecutive month of decline. Although the rate of contraction was the slowest since May 2024, that’s more of the seasonal pattern than a material difference.
Importantly, new orders fell for the ninth straight month, with the decline accelerating compared to January. Both services and manufacturing saw drops in new business, reflecting ongoing demand challenges. Additionally, manufacturing employment fell at the sharpest rate in four-and-a-half years, raising fears the latest false dawn is proving to be the final straw on the entire labor market edifice.
Germany’s PMI data, on the surface, present a more optimistic picture, indicating a modest acceleration in growth, with the Composite PMI rising to 51.0, marking the highest level in nine months. This improvement is largely attributed to a reduced drag from manufacturing, which contracted at its slowest pace since May 2024. Meanwhile, the services sector maintained a steady level, albeit at a slightly slower rate.
One notable trend is the disparity in performance across the Eurozone. Germany's relative stability – meaning no longer contracting at egregious rates - contrasts with France, which recorded the sharpest decline in business activity in nearly a year and a half. This divergence reflects a broader pattern of regional imbalances, with Germany benefiting from a seasonal rebound that has not materialized in other Eurozone economies due to that accelerating downturn. It could be argued that the current weakness in services across Europe parallels trends observed in the US, suggesting a broader slowdown following a pull-forward of demand into 2024.
Overall employment in the manufacturing sector has started to decline at a faster clip than in January. This trend could be linked, among other factors, to revised growth expectations, which have been adjusted downward, falling below the long-run average. A similar pattern has been observed in the services sector as well.
