The composite index of the purchasing managers’ survey for the eurozone took a small breather in February. It slipped marginally to 52.7 points (January: 52.9), but is still up on the fourth-quarter average last year. This is mainly thanks to Germany, where the compositie index rose to 56.1 (January: 55.5). In the other eurozone countries, with the exception of France, the average reading fell only slightly compared with January.
Whereas the latest GDP data fromFrancewere on the encouraging side, today’s drop in the composite index from 48.9 to 47.6 points – caused by both the industrial and the service sector – is sobering. It will be particularly interesting to see whether the survey results from the EU Commission and the Statistical Institute INSEE show a deterioration in February (there are in part marked differences between PMIs, national and EU sentiment indicators). For France we are forecasting no acceleration in growth from the GDP sequential rate of 0.3% seen in the final quarter 2013 and are expecting economic growth of 1.2% this year.
All told, we believe today’s figures back our forecast of eurozone GDP growth of 1.5% this year. The recession is clearly over, but the economy is not gathering much momentum. In our view, the latest news on the economy, including today’s “breather”, provide no grounds for lower ECB key rates: the clearly positive sequential GDP growth rate in the final quarter of 2013 has laid a sound foundation for economic growth in 2014; capacity utilization in the eurozone has risen substantially for the first time in ages; lending conditions for small and medium-sized companies are no longer being tightened but relaxed; the EU Commission’s economic sentiment index has been up on its long-term average for two months; in some eurozone problem countries unemployment is falling.