Flash PMIs and Germany’s bragging rights | FT Alphaville

Flash PMIs and Germany’s bragging rights

Europe must grow its way out of this slump! It’s not enough to bail out profligate sovereigns and banks! Capital must be deployed to SMEs! Youth unemployment must be tackled! Fiscal discipline is not enough on its own!

Fire all engines!!

Markit Flash Germany PMI®

German private sector sees fastest growth for seven months in January, driven by upturn in both manufacturing and services activity

The seasonally adjusted Markit Flash Germany Composite Output Index rose from 51.3 in December to 54.0, and thereby signalled the strongest pace of expansion since June 2011.

Excellent news from Markit’s flash PMI for Germany for January, out today.

Manufacturers also signalled a particularly marked drop in new export business, which they linked to widespread economic uncertainty and corresponding delays to clients’ spending decisions. Reduced export demand in the manufacturing sector has now been reported for seven months in a row.

Ah, that part sounds less good actually…

Right, all remaining engines!!

Markit Flash France PMI®

Services expansion drives marginal rise in French private sector output

The rise in the headline index primarily reflected an expansion of service sector activity during the first month of 2012. The increase in activity was the second in consecutive months and the fastest since last August. Manufacturing sector output, however, fell further in January. Although marginal, the latest drop in production was the sixth in successive months.

That’s not what we were hoping for… Where’s the growth?

Group reportcard time:

Markit Flash Eurozone PMI®

Stabilisation of output fails to prevent first fall in employment since spring 2010

Um, “stabilisation”. That sounds nice.

Let’s translate chief economist Chris Williamson at Markit to figure out what the backstory is:

The Eurozone economy appears to have stabilised in January, showing a marginal increase after a 0.5-0.6% contraction in gross domestic product in the final quarter of last year, according to the flash Markit PMI.

The improvement largely reflected an upturn in Germany and very modest growth in France. The rest of the region continued to undergo a steep downturn, though even here the average rate of decline eased.

Germany is doing well for now, France is treading water but in no way drowning. The rest* of the eurozone countries covered by the index are doing slightly less bad than they were, but it’s still pretty bad.

Encouragingly, the headline Output Index has now risen for three successive months, suggesting that the rate of contraction may have peaked back in October and that a slide back into recession may be avoided.

Taken altogether, things look modestly hopeful. However…

we remain cautious about the improvement.

Inflows of new business continued to fall, meaning the marginal increase in output seen in January was the result of firms eating into their backlog of orders. Furthermore, many firms are having to offer discounts to stimulate sales.

It is therefore not altogether surprising to see firms trim their headcounts for the first time since the spring of 2010, suggesting that companies have entered a challenging-looking 2012 with a focus on cutting costs and boosting productivity.

Hold onto your hats. And jobs.

* “National manufacturing data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. National services data are included for Germany, France, Italy, Spain and the Republic of Ireland.”

Related links:
PMI press releases – Markit Economics
PMIs kick market when down – FT Alphaville