EMU: PMI Manufacturing Final

Highlights

The euro area's industrial cycle is showing its clearest revival since 2022. The Eurozone manufacturing PMI climbed to 50.8 in February from 49.5 in January, its highest level in 44 months and back above the 50 threshold that signals expansion. The shift was driven primarily by the strongest increase in new factory orders since April 2022, which in turn supported a firmer rise in production.

The breadth of the upturn is notable. Six of eight monitored economies registered expansion, with Germany recording a particularly sharp improvement. France stalled after January's rebound, while Spain and Austria lagged. Output has now risen in 11 of the past 12 months, but this is one of the few occasions in recent years where demand, rather than inventory adjustment, is leading the expansion. Export contraction also softened, reducing an important drag on growth.

Yet the recovery comes with mounting price pressures. Input cost inflation accelerated for a third consecutive month to a three-year high, prompting the strongest rise in factory gate prices since March 2023. Employment continues to decline, suggesting firms remain cautious.

In essence, eurozone manufacturing is regaining momentum, but the balance between renewed demand and resurging inflation will shape the recovery. These updates bring the RPI to minus 11 and the RPI-P to minus 13, meaning that economic activities continue to lag market expectations in the euro area.

Market Consensus Before Announcement

The consensus sees no revision in the final for February from the flash at 50.8 and up from 49.5 in January final.

Definition

The Manufacturing Purchasing Managers' Index (PMI) provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector survey incorporating around 3,000 companies. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting). Released by S&P Global, national data are included for Germany, France, Italy, Spain, the Netherlands, Austria, the Republic of Ireland and Greece. These countries together account for an estimated 89 percent of Eurozone manufacturing activity.

Description

Investors need to keep their fingers on the pulse of the economy because it dictates how various types of investments will perform. By tracking economic data such as the ISM manufacturing index in the U.S. and the S&P Global PMIs elsewhere, investors will know what the economic backdrop is for the various markets. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers less rapid growth and is extremely sensitive to whether the economy is growing too quickly and causing potential inflationary pressures.

The S&P Global PMI manufacturing data give a detailed look at the manufacturing sector, how busy it is and where things are headed. Since the manufacturing sector is a major source of cyclical variability in the economy, this report has a big influence on the markets. And its sub-indexes provide a picture of orders, output, employment and prices.

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