MNI 5 THINGS: EMU Composite PMI At 18-Month Low

--Despite Slowing Growth, PMIs Consistent With 0.4% Q2 Growth

By Jai Lakhani

     LONDON (MNI) - An insight into how euro area economic activity fared at the

start of the second quarter of 2018 came Wednesday, when the euro area flash HIS

Markit PMIs were released. With activity losing some momentum over the first

four months of the year, the figures show May failed to buck the downward trend.

     Here are five things we learned from the release worth noting.

     1) Analysts Miss by a record high: 

     Before the release, the analyst hit/miss shows that since May 2015,

analysts have over-estimated very slightly the PMI number with an average

over-estimate of 0.008 percentage points. However, analysts call for May at 55.1

was an over-estimate of a whole unit -- a record miss during the time-period

stated. Whilst a record miss, it is not surprising due to the wild misses in the

past, most notably in July 2016 when analysts under-estimated the figure by 0.7.

     2) France's expansion weakest for 16 months: 

     France reported its smallest rise in services activity since January 2017,

which overshadowed its factory output growth improving to its fastest for three

months. Consequently, France's overall expansion was the weakest for 16 months.

However, as MNI analysis eluded to before the data, the four bank holidays in

May and the strikes arguably distorted the numbers. Chris Williamson, Chief

Business Economist at HIS Markit noted that "May saw reports of businesses being

adversely affected by an unusually high number of public holidays."

     3) Eurozone's biggest economy looking meagre: 

     As MNI analysis also noted before the release, the German ZEW sentiment

pointed to weak sentiment in Germany and the PMI data showed exactly that.

Business activity in Germany showed the smallest rise for 20 months, with

factory output growth the weakest for eighteen months and the services expanding

to the least extent for 20 months.

     4) EMU Composite PMI points to robust growth despite 18-month low:

      Whilst there are many points which show a weakening trend in the Euro

Area, it is worth noting that the number remains well above the 50 no-change

mark and continues to signal robust growth of business activity in the Euro

Area. As Williamson goes on to argue "... despite the headline PMI dropping to

an 18-month low, the survey remains at a level consistent with the eurozone

economy growing at a reasonably solid rate of just over 0.4% in the second

quarter."

     5) Job creation mirrors PMI story, inflation unscathed by oil: 

     Job creation slipped to the lowest for nine months with moderations in

manufacturing and services. However, the increase in employment was robust with

business outlook remaining above its long-run average. Furthermore, whilst input

cost inflation accelerated to a three month high off the back of a three-month

high, there was little to suggest this was impacting inflation with the

composite output price index falling to its lowest level since September.

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

--MNI London Bureau; +44 203 865 3828; email: jai.lakhani@marketnews.com

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