January flash PMIs’ fall a further blow to the ECB’s benign base case

Following a surprising rise of the ZEW earlier this week, today’s release of the January Flash PMIs defied expectations that sentiment would stabilize on a broader basis. The January composite PMI reading is the lowest since July 2013 and 0.3 standard deviations below average.

Highlights:

  • With a reading of 50.7, the euro area composite flash PMI for January fell to the lowest level since July 2013 amid employment creation losing steam.
  • The deterioration in sentiment was mainly driven by faltering service sector sentiment in France suggesting ongoing headwinds from the yellow vests.
  • Today’s PMI data would suggest a meagre Q1 GDP growth rate of just 0.1% qoq, highlighting downside risks to euro area activity and the domestic recovery.
  • The January PMIs are a further challenge to the ECB’s benign macro scenario.

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JANUARY FLASH PMIS’ FALL A FURTHER BLOW TO THE ECB’S BENIGN BASE CASE

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