Unchanged PMI in the eurozone signals growth will continue, but slower

Lloyd Doyle
April 23, 2018

A welder works on the structure of a float as preparations continue for the Carnival parade in Nice February 11, 2014. However continued dovish readings for Euro Zone in preliminary PMI data to be released this week could help United States dollar gain further as Federal Reserve looks keen to raise interest rates this year. The survey showed that lower inflows of new orders, alongside weakened optimism about the business outlook, suggests that growth could slow further in May.

Having peaked in January, growth has steadily slowed in the bloc as a strong currency and fears that a trade spat between China and the U.S. could deepen affects demand and confidence.

"After having shown signs of slowing in recent months, the data will buoy hopes that the renaissance in the French economy has far from run its course", Alex Gill, an economist at IHS Markit said.

The ECB's rate-setting Governing Council meets on Thursday.

European Central Bank chief Mario Draghi said last week he was confident the inflation outlook has picked up, but uncertainties "warrant patience, persistence and prudence".


Euro zone inflation in the bloc was just 1.3% in March, a long way from the ECB's 2% target, and this month the output prices PMI fell to 53.2 from 53.5.

The purchasing managers' index (PMI) by IHS Markit stayed flat at 55.2 in April. The score was forecast to drop marginally to 54.8. The employment sub-index jumped to 55.0 from 54.1.

An index measuring output which feeds into the composite PMI, dipped to a 17-month low of 55.8 from 55.9.

On the other hand, the factory PMI fell to 56.0 from 56.6 in March.

The German 10-year bond yields, which move inversely to its price, jumped 4-1/2 basis points to 0.63 percent, the yield on 30-year note also surged almost 4-1/2 basis points to 1.29 percent while the yield on short-term 2-year traded 2 basis points higher at -0.53 percent by 10:20GMT. New export order growth dwindled. Economists had forecast the index to ease to 53.5.

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