EuroBoom: Eurozone PMI Data Confirms Economy Expanding at Break-Neck Speed

The latest and most timely data pertaining to Eurozone economic performance confirms expansion continues to run at historical highs. No wonder the Euro is the darling of global currency markets.

The data comes a day before the European Central Bank meets to decide on the route forward for Eurozone monetary policy - something that is expected to have a strong impact on the Euro. Policy-makers will welcome the latest data as confirmation that their efforts are paying off.

IHS Markit, compilers of the PMI series, confirm their latest data shows the Eurozone started 2018 with the fastest growth for nearly 12 years.

Looking at the details, Eurozone manufacturing PMI for January read at 59.6, below the 60.4 forecast. This therefore a disappointment against analyst expectations, however this is still a blistering rate of expansion by historical terms.

Indeed, German manufacturing PMI numbers released half an hour prior read at 61.2 which confirms the Eurozone's power house is running on all cylinders.

The services PMI read at 57.6, well ahead of the 56.5 forecast by analysts.

The composite PMI now reads at 58.6, well ahead of the 57.9 forecast.

"An acceleration of service sector growth to the fastest since August 2007 was partly countered by a slowdown in manufacturing output growth, though the latter remained very buoyant. The latest three months have seen the strongest factory output increase since 2000," say IHS Markit in a comment on their findings.

Amid strong growth of new orders and improved confidence about the outlook, companies expanded their workforce numbers to the greatest extent since September 2000. Factory payroll growth held close to recent record highs while service sector job gains hit the highest since October 2007.

Price pressures meanwhile intensified during January, in part reflecting improved pricing power as demand outpaced supply, as well as rising oil prices.

This will be latched onto by European Central Bank policy-makers who are desperate to see Eurozone inflation head back towards the 2.0% mark; the data should justify their decision to exit their programme of money printing at some point in coming months. Recall, the promise of an exit from quantitative easing has been a key driver of Euro strength over recent months.

“The eurozone has got off to a flying start in 2018, with business activity expanding at a rate not seen for almost 12 years. The acceleration of growth pushes the survey data into territory consistent with the economy expanding at a super-strong quarterly rate approaching 1%," says Chris Williamson, Chief Economist at IHS Markit.

Make no mistake, the Eurozone is booming, and this only bodes for a stronger Euro.

The Euro was seen higher following the release with the Euro index - a broad gauge of Euro strength based on performance against a basket of currencies - was 0.17% higher on the day at 97.29.

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