MNI 5 THINGS: Euro Area PMIs Set To Offer Q2 Update

Repeats Story Initially Transmitted at 16:48 GMT May 22/12:48 EST May 22

--EMU May Flash Services, Manufacturing PMI Data Due For Release Weds

     LONDON (MNI) - An insight into how euro area economic activity is faring in

the second quarter of 2018 will be published Wednesday, when the latest euro

area flash IHS Markit PMIs are releases. With activity losing some momentum over

the first three months of the year, the figures will suggest if the flash

estimate for May bucks the downward trend.

     Ahead of the release, we outline five themes for particular attention.

     1) Analysts Track Record: 

     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. There have been some wild misses however, most notably

in July 2016 when analysts under-estimated the figure by 0.7.

     2) April Recap: 

     The Euro Area final composite PMI dropped further from March's 55.2 to

55.1. This was the third consecutive month it was down and illustrated a

15-month low. The 1.9 decline from February was driven by losses in both the

manufacturing index (down 3.7 points to 55.9) and services index (down 1.3

points to 54.9). Shown in the table below, the composite indices across all of

the 'big four' moderated down except for France which has been the bright spot

for the past two months.

     Table 1: Headline Euro Area Composite PMI

PMI Composite Index  January 2018  February 2018  March 2018  April 2018

------------------------------------------------------------------------

Euro Area                    57.1           55.3        55.2        55.1

Germany                      57.6           55.4        55.1        54.6

France                       57.3           56.2        56.3        56.9

Italy                        59.0           56.0        53.5        52.9

Spain                        56.7           57.1        55.8        55.4

     3) Poor export demand in Q1 likely to unwind: 

     The Eurozone saw strong export growth throughout last year, however Q1 saw

a marked drop. This is likely to have been linked to the Euro appreciating in Q1

and peaking at EUR1.25 versus the dollar in February (its highest since December

2014) on the back of dollar weakness. Since then, a retracement has occurred and

the Euro has weakened which could assist export-facing Euro Area businesses.

Whether or not this weakness will be sustained long term however, is another

question.

     4) German, Euro Confidence Low:

     The German ZEW economic sentiment index held steady at -8.2 in April,

failing to notch an improvement as most analysts had expected, underlining

concerns over health in the eurozone's biggest economy. Many of the factors that

bugged investors in April -- US/China trade tensions, domestic weakness and

rising oil prices -- remained largely in play in May, suggesting the resulting

uncertainty is still weighing on German investors. Across Europe confidence also

stuttered in May, shown by the EZ Sentix index slipping a touch. Released later

this week, this picture will be updated with the release of Belgian business

confidence and the German IFO survey.

     5.) Take caution over France PMI: 

     May saw strikes in France as well as bank holiday season. Both of these

factors could have played a role in skewing the PMI which is seasonally adjusted

but not working days adjusted. In total, there were four bank holidays in May,

on the 1st,8th,10th and 21st , because of this, readings of activity may be

distorted.

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

[TOPICS: MTABLE]