Friday, February 21, 2025 7:50 AM EDT
Image Source: Pexels
The PMI indicates stabilizing economic activity, but declining new orders and hiring reveals a weak short-term outlook despite stock market optimism in Europe.
After a decent start to 2024, last year ended on a weak note as the eurozone economy fell back into an all-too-familiar stagnation. The start to 2025 shows signs of stabilization, with the composite PMI for the eurozone at 50.2 in February, unchanged from last month. This suggests continued muddling through around 0%. That's not great, but there's at least no sign of activity deteriorating further. The weakness was concentrated in France as Germany and the rest of the eurozone showed expanding output.
Manufacturing has shown some signs of bottoming out, with the manufacturing output PMI increasing from 47.1 to 48.7. This still indicates contraction, but the pace of the decline is slowing. Services are still showing growth, but this is despite weakening new business. Consumer confidence crept up a bit in February but remained solidly below the long-term average. The downbeat consumer is causing household consumption to remain muted amid global uncertainty, which holds back services activity.
With orders still declining, businesses indicating that they are reducing workforces and possibly disruptive tariffs on the table, the outlook remains very uncertain for the coming months. Stock markets have become more upbeat about Europe recently, but improving sentiment is difficult to justify looking at the short-term outlook.
Even though the European Central Bank seems convinced that inflation is under control, cost pressures do continue to creep up for businesses. In February, the PMI again flagged rising input costs that are being priced through to the consumer to some extent. Then again, it's a stretch to expect a marked flare up of medium-term inflation in the current weak demand environment. We expect the ECB to continue to lower rates for the time being.
More By This Author:
FX Daily: US Exceptionalism Doubts Hit The Dollar Japanese Inflation Accelerates, Raising Odds Of Another Rate Hike Polish Investment Recovers And Wage Pressures Ease
Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any ...
more
Disclaimer: This publication has been prepared by the Economic and Financial Analysis Division of ING Bank N.V. (“ING”) solely for information purposes without regard to any particular user's investment objectives, financial situation, or means. ING forms part of ING Group (being for this purpose ING Group NV and its subsidiary and affiliated companies). The information in the publication is not an investment recommendation and it is not investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Reasonable care has been taken to ensure that this publication is not untrue or misleading when published, but ING does not represent that it is accurate or complete. ING does not accept any liability for any direct, indirect or consequential loss arising from any use of this publication. Unless otherwise stated, any views, forecasts, or estimates are solely those of the author(s), as of the date of the publication and are subject to change without notice.
The distribution of this publication may be restricted by law or regulation in different jurisdictions and persons into whose possession this publication comes should inform themselves about, and observe, such restrictions.
Copyright and database rights protection exists in this report and it may not be reproduced, distributed or published by any person for any purpose without the prior express consent of ING. All rights are reserved. ING Bank N.V. is authorised by the Dutch Central Bank and supervised by the European Central Bank (ECB), the Dutch Central Bank (DNB) and the Dutch Authority for the Financial Markets (AFM). ING Bank N.V. is incorporated in the Netherlands (Trade Register no. 33031431 Amsterdam). In the United Kingdom this information is approved and/or communicated by ING Bank N.V., London Branch. ING Bank N.V., London Branch is deemed authorised by the Prudential Regulation Authority and is subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. The nature and extent of consumer protections may differ from those for firms based in the UK. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website.. ING Bank N.V., London branch is registered in England (Registration number BR000341) at 8-10 Moorgate, London EC2 6DA. For US Investors: Any person wishing to discuss this report or effect transactions in any security discussed herein should contact ING Financial Markets LLC, which is a member of the NYSE, FINRA and SIPC and part of ING, and which has accepted responsibility for the distribution of this report in the United States under applicable requirements.
less
How did you like this article? Let us know so we can better customize your reading experience.
