Overview: The Flash PMI for Euroland disappointed in February as the slight improvement seen in January was reversed. PMI manufacturing fell to 33.6 from 34.4 (Consensus 35.0) and service PMI fell to 38.9 from 42.2 (Consensus 42.5). Both indices fell to new all time lows. The data point to continued weakness in GDP in Q1 falling around 1% q/q.

The weakness in February PMI for Euroland is similar to the pattern seen in US regional surveys with de-clines in both the Empire and Philly Fed indexes. We still believe we are in a bottoming process in the PMI data, but these data indicate it may take longer than indicated by the January numbers. Pressure for more ECB cuts are intensifying and this supports our expectations of a 50bp cut in March.

Details: New orders fell slightly in February following a small increase in January. Inventories have been adjusted strongly during autumn and the adjustment continues, although the inventories of finished goods index have increased slightly. The order-investment balance point to a rebound soon – or at least a stabiliza-tion in industrial production.

Flash PMI in Germany was overall weaker than expected. German manufacturing PMI rose slightly from 32 to 32.2, but it was weaker than consensus expectations of 32.5. Also note that German manufacturing PMI did not rise last month as in most other countries so the rise today may be more a delayed reaction to what was seen elsewhere in January. The German service PMI was very weak and fell to a new all time low at 41.6 from 45.2 last month. The German exposure to Eastern Europe is turning into a big disadvantage at the moment and the intensification on the crisis there may weigh further on Germany in coming months.

French manufacturing Flash PMI was substantially weaker than expected as it fell from 37.9 to 35.4 in Feb-ruary. Consensus was a slight rise to 38.2 and we also expected to see a slight increase. Instead the index reversed almost fully the rise last month. The same pattern was seen in the PMI service for France which fell from 42.6 to 40.1.


Danske Bank


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