PMI Data Shows Uneven Recovery in Europe, Slowdown in China

Trey Thoelcke

Weakness in France, the second largest nation in the eurozone, put a damper on business activity in the 18-nation bloc overall, according to Markit’s Composite Purchasing Managers’ Index. The eurozone PMI fell from 52.9 in January to 52.7. Any reading above 50 indicates an expansion in manufacturing and services activity.

Business activity in Germany, the largest economy in the region, grew at the fastest rate in almost three years. The flash PMI reading of 56.1 was up from 55.5 a month ago. But that was offset by the decline in France’s PMI reading from 48.9 in January to 47.6. The services sector in France shrank at its fastest pace in nine months.

Chris Williamson, chief economist at Markit, said:

A dip in the [eurozone] PMI provides a reminder that the region’s recovery continues to be uneven and fragile. Growth continued to be led by Germany, which contrasts with a worrying renewed downturn in France.

Meanwhile, the HSBC flash manufacturing PMI for China fell to 48.3 in February from the previous 49.5. That was a seven-month low, and the news pushed Asian and European shares lower Thursday.

Hongbin Qu, Chief Economist, China and Co-head of Asian Economic Research at HSBC said:

February’s flash reading of the HSBC China Manufacturing PMI moderated further as new orders and production contracted, reflecting the renewed destocking activities. The building-up of disinflationary pressures implies that the underlying momentum for manufacturing growth could be weakening. We believe Beijing policy makers should and can fine-tune policy to keep growth at a steady pace in the coming year.

In addition, U.S. Federal Reserve said on Wednesday said the U.S. economy appeared to be gaining traction despite a recent slowdown caused by inclement weather. That will allow the central bank to stick to its plan to wind down bond-buying this year.

The final manufacturing PMI readings for February will be released on March 3, 2014.