European Manufacturing PMI Mostly in Line

Alan Penny

4 November 2019

3 min read

U.S. dollar flat

  • French and German Manufacturing PMI slightly better
  • Spanish Manufacturing PMI slightly under expectations
  • European Union still showing on even growth

Early on Monday, the markets saw releases from Europe involving Manufacturing PMI figures. Data came out from the European Union, accompanied by the Spanish, Italian, French, and German figures. All this gives us a glimpse as to whether or not the European economy is starting to expand again.

The numbers

The numbers coming out of the European Union were a bit of a mixed bag on Monday, as the French, German, Spanish, Italian, and EU Manufacturing PMI figures all came out simultaneously.

The stronger European economies did, in fact, show signs of slightly-better-than-anticipated figures, such as the Germans printing 42.1 as opposed to the expected 41.9. The Italians printed 47.7, as opposed to the 47.6 figure that was expected. The French printed 50.7 against the expected 50.5. The Final Manufacturing PMI figure that came out of the EU itself printed 45.9 against the expected figure of 45.7. However, the Spanish fell short, printing 46.8 as opposed to an expected 47.5.

perhaps the European Union is trying to turn around and starting to recover a bit

The one thing to take away is that perhaps the European Union is trying to turn around and starting to recover a bit; unfortunately, this still leads to contraction, not expansion. However, these numbers can be thought of as “less bad” than anticipated.

This could be a sign that things are turning around, but it still shows that Europe is weaker than the United States, and therefore could give a boost to the US dollar going forward.

Massive external issues

There are massive external issues when it comes to growth in the European Union, some of which have absolutely nothing to do with the European Union itself.

For example, the United States and China bickering and escalating the trade war causes major issues with demand in the Chinese mainland. Germany sends massive amounts of exports into China, and vice versa. This is disrupting a lot of manufacturing in Germany, and manufacturing itself is, of course, going to suffer as global growth slows down.

It’s not just China, it’s everywhere. As long as that’s the case, Germany will be a bit soft simply because it is such an export-driven economy.

Because of this, Europe still looks to be at the mercy of the rest of the world, as growth continues to be lackluster at best. As the global slowdown continues, this should continue to work against the value of the currency as well as the European indices.

Ultimately, manufacturing figures are to be paid attention to going forward, and they will have a large influence on where we go next.

At this point, the markets will continue to worry about a recession and pay attention to central banks around the world. The European Central Bank should continue to be very loose with its monetary policy, as it has stated recently. With the inclusion of Christine Lagarde, it looks as if the European Union is likely to continue its accommodative monetary policy.

Written By
Alan Penny

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