Amid Optimistic views, PMIs In Eurozone Expected To Rise

Preliminary PMIs by S&P Global for the Eurozone will be reported Tuesday, January 24 at 09:00 GMT. Headline manufacturing PMI is expected at 48.5 vs. 47.8 in December, services PMI is expected at 50.2 vs. 49.8 in December, and the composite is expected at 49.8 vs. 49.3 in December.

Analysts and economists do not expect the recent improvement in sentiment to be sustainable. However, gas shortage could cause the purchasing managers’ index for the service sector to rise slightly in January. Some economists expect a value of 50.

The index for the manufacturing sector could also slightly improve at best. It is true that supply problems now eased to some extent, allowing companies to reduce their still very high order backlogs more quickly. But in the medium term, the significant decline in new orders could impact the overall sentiment. Specifically, the reading of the purchasing managers’ index for the manufacturing sector is expected to come in at the 48.0 mark in January.”

Eurozone’s PMIs continued to improve in January, suggesting that the economic outlook might not be as bad as previously thought. Economists look for a third straight increase in the German manufacturing PMI as wholesale energy prices fell further and material availability improved. In France, they think slight improvements in mobility indicators suggest another small increased in the services PMI.

The flash estimate for the manufacturing and services PMI indices in January is expected by others to increase by 0.7pts to 48.5 and 1.1pts to 50.9, respectively, leading to an increase in the composite PMI of 1.0pts to 50.3.

French Manufacturing PMI is forecast to improve to 49.7, up from 49.2 prior. That’s only marginally in contraction, setting the optimistic tone if the result comes in above expectations. Services PMI is expected to do even better at 49.8, up from 49.5 prior.

German Manufacturing PMI is expected to improve, but remain in worse condition than France, at 47.8 compared to 47.1 prior. Services are expected to almost return to expansion at 49.6 compared to 49.2 prior. The latest news on German energy reserves has been positive, but the last few days have seen cold weather in Europe.

UK Manufacturing PMI is expected to stage a marginal improvement though remains firmly in contraction at 45.5 compared to 45.3 prior. The persistent strikes and reports that even more are expected in February have contributed to pessimism in the industrial sector. Services are forecast to remain in contraction by the bare minimum at 49.9.