A Day of PMIs

As previouly mentioned in our week ahead, Tuesday heavily focused on PMI data. First off, we saw a print from the Eurozone with France & Germany starting the day, where we can see divergences in manufacturing and services. We are now expected to see growth in 2 for the eurozone albeit modest growth, as manufacturing is dragging on economy growth.

However, the downside to it is we are currently seeing signs that the economic expansion in Europe is easing. German companies in the manufacturing sector have seen a sharp contraction in new orders, as they have fallen significantly more than in France, with the production index pointing south.

It is being said that overall, the companies in this manufacturing sector aren’t overly optimistic about their production for the upcoming 12 months. This is based on reduction of orders and lower inventories. Fortunately, Eurostat have noted that the situation is by no means horrendous, as orders were still above the 12-month average for the major euro countries.

As the services sector selling prices continue to rise, the ECB is put in a nightmare situation as prices here continue to rally. After its most recent interest rate decision, the ECB can’t really afford to put the brakes on hiking rates “Pause”.

Employment continues to rise here, again taking away fears of recessions, as companies will surely not be downsizing.


A very similar print to the eurozone - a contrast in Services to manufacturing with manufacturing keeping on the softer side forecast of 48 and print of 46.9. Meanwhile, composite does still show expansion with 53.9 reading largely due to demand in the services sector.

May provided a strong month for economic growth In the UK buoyed by the coronation of King Charles III.

Growth is certaintly good, but in the current climate with interest rates continuing to increase, it is now adding more fuel to the inflation fire as the service sector is being overrun by demand. Therefore, higher prices are being charged, thus paying higher salaries to attract more employees.

Manufacturing on the other side is a completely different story, where inventories are being run low and prices slashed to create more demand.

With such a divergence between the two economies (services & manufacturing), it is now the service sector that dictates how the BoE plan policy decisions to halt the inflationary pressures. More hikes are yet to be expetced based on recent data.


The story seems to reciprocate in the US, with a deteriorating manufacturing print to below 50 now (48.2 contraction), although reports this is down to lower inventories due to improved better delivery times and reduced order inflows.

Output has slowed largely down to increased size of workforce and better delivery of inputs. Demand is weakening, a sharp decline in new orders led by previous selling price increases.

Backlogs are being cleared due to larger and better workforce as labour conditions continue to improve.

Service sector printed a 55.1 reading the fastest growth YTD, growth was down to demand from new and existing customers.

There was also the quickest growth in new business for service provider dating back to April 2022, taking it above the series average. Job creation was on the rise with employment growth rising at its fastest pace for 10 months. Optimism remains at YTD highs with continued growth of new business for service providers over the next 12 months, this being driven by expectations of sustained increase from client demand.

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