Eurozone February PMI: Slight Economic Growth with Slowing Manufacturing Decline

Data Interpretation

Summary:

Data released on February 21 showed that the Eurozone Composite PMI for February stood at 50.2, unchanged from January, indicating that the overall economic growth momentum remained stable. The Manufacturing PMI rose to 47.3, a 9-month high, while the Services PMI fell to 50.7, a 3-month low. Despite the slowing decline in manufacturing, weak demand and falling employment still pose challenges to economic recovery.

On February 21, S&P Global released the Eurozone February HCOB PMI report:

HCOB Flash Eurozone Manufacturing PMI at 47.3 (January: 46.6), 9-month high.

HCOB Flash Eurozone Services PMI Business Activity Index at 50.7 (January: 51.3), 3-month low.

HCOB Flash Eurozone Composite PMI Output Index at 50.2 (January: 50.2), Unchanged pace of growth.

The data indicated that the Eurozone private sector maintained a slight expansion in February, with the Composite PMI remaining at 50.2, suggesting that economic growth was still in a marginal state. Although manufacturing output declined for the 23rd consecutive month, the decline was the smallest since May 2024, showing signs of industry stabilization. However, new orders fell for the ninth consecutive month, and corporate employment levels declined, reflecting weak demand and weakening business confidence.

By region, the German economy expanded for the second consecutive month, with a growth rate reaching a nine-month high, while French business activity contracted sharply, registering the fastest decline in nearly one and a half years. Other Eurozone countries performed relatively robustly, with solid output growth.

In terms of employment, the Eurozone private sector staffing levels decreased for the seventh successive month. In fact, the decline in manufacturing employment was the most pronounced in four-and-a-half years. Excluding the COVID-19 pandemic, the fall was the largest since July 2012. Staffing levels dropped in both Germany and France, with the pace of job cuts sharper in the latter. Meanwhile, the rest of the Eurozone saw employment increase at the fastest pace in five months.

Regarding inflation, the latest increase in input prices was the fastest since April 2023 and above the series average, where inflationary pressures remained significant. Manufacturing input prices rose for the second month running and at the fastest pace in six months. In turn, output price inflation also accelerated and was at a ten-month high in February.

Looking ahead, although companies in the Eurozone continued to predict growth of business activity over the coming year, optimism dipped to a three-month low in February. Sentiment dropped across both manufacturing and services alike. Positive expectations in Germany dipped, while optimists in France only just outweighed the pessimists. Overall, market uncertainty, inflationary pressures, and global trade risks remain the main challenges for the Eurozone.

In general, the Eurozone February PMI data indicated that economic growth remained fragile, with signs of stabilization in manufacturing but a slowdown in services growth and low business confidence. In the coming months, the market will closely monitor the European Central Bank's policies and the global economic trend to assess the sustainability of the Eurozone's economic recovery.

Eurozone February PMI

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Owen Li

Economic

Malaysia’s international reserves had risen by US$1.3 billion as at Feb 14 from two weeks earlier, according to Bank Negara Malaysia.

International reserves totalled US$117.7 billion, versus US$116.4 billion as at end-January, the central bank said in a statement on Friday.

The position is sufficient to finance five months of imports of goods and services, and is equivalent to 0.9 times the country’s total short-term external debt, it said.

Short-term external debt comprises borrowings from non-residents with maturity of one year or less, mostly by resident banks for their foreign currency liquidity operations, as well as multinational corporations, including foreign banks, borrowings from their overseas parents or headquarters.

Among key reserve components, foreign currency reserves increased to US$105.2 billion from US$103.8 billion as at end-January, while the country’s position at the International Monetary Fund (IMF) was steady at US$1.2 billion

Special drawing rights (SDR) — reserve assets allocated by the IMF based on a basket of major currencies — were unchanged at US$5.7 billion, as did the central bank’s gold holdings, which were unchanged at US$3.3 billion.

Other reserve assets saw a slight slip to US$2.3 billion from US$2.4 billion.

Source: Theedgemarkets

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Warren Takunda

Economic

London stocks were steady in early trade on Friday as investors mulled the latest retail sales and borrowing figures, but Standard Chartered surged after well-received results.

At 0825 GMT, the FTSE 100 was flat at 8,664.68

Data released earlier by the Office for National Statistics showed that January’s monthly budget surplus was the biggest on record, although it still missed expectations.

Public finances recorded a £15.4bn surplus in January, up £800m on the previous year. This marked the highest figure for January since monthly records began in 1993.

Nevertheless, the figure was below the £20.5bn forecast by the Office for Budget Responsibility and consensus forecasts of £18.8bn.

The ONS said combined self-assessed income and capital gains tax receipts were provisionally estimated at £36.2bn in January, up £3.8bn on the year and the highest January receipts since monthly records began in 1999.

Alex Kerr, UK economist at Capital Economics, said: "While January’s disappointing public finances figures may not be as bad as they first appear, they continue the run of bad news for the Chancellor in 2025 and underline the difficult choices she faces.

"While there is increasing pressure on the government to commit to higher defence spending, the OBR is likely to conclude that the Chancellor’s headroom against her fiscal rules has been wiped out and she will probably need to tighten fiscal policy as a result."

Separate figures from the ONS showed that retail sales bounced back more than expected last month.

Retail sales grew 1.7% on the month following four consecutive months of falls and after a downwardly-revised 0.6% drop in December. Economists were expecting a smaller increase of 0.3%.

The ONS said food store sales volumes grew strongly in January 2025, following falls in recent months.

More broadly, sales volumes declined by 0.6% in the three months to January 2025, compared with the three months to October 2024, but they were up 1.4% compared with the three months to January 2024.

Food stores sales volumes rose 5.6% on the month - the largest jump since March 2020.

Sales at non-food stores - the total of department, clothing, household and other non-food stores - fell 1.3%. Clothing retailers and household goods stores suggested the fall was due to reduced consumer confidence.

Paul Dales, chief UK economist at Capital Economics, said: "The 1.7% m/m leap in retail sales volumes in January (CE +1.0%, consensus +0.3%) suggests the retail sector shot out of the blocks at the start of the year.

"But some of that strength will have come at the expense of weakness in other parts of the economy. And with households in a fairly glum mood, we doubt it will last."

In equity markets, Asia-focused bank Standard Chartered surged to the top of the FTSE 100 as it said it would hand back $1.5bn to shareholders after a rise in annual earnings.

Pre-tax profits for 2024 came in at $6bn, up from $5.1bn a year earlier and slightly below average estimates of $6.2bn.

NatWest and Barclays were also higher.

Ferrexpo gained sharply, having tumbled late on Thursday after Ukrainian officials said they planned to nationalise the company’s Poltava mining and processing plant amid allegations of illegal mining and fund misappropriation.

Source: Sharecast

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S&P Global Inc.

Data Interpretation

On February 21, S&P Global released the HCOB PMI report for Germany in February:

HCOB Flash Germany Manufacturing PMI at 46.1 (Jan: 45.0), 24-month high.

HCOB Flash Germany Services PMI Business Activity Index at 52.2 (Jan: 52.5), 2-month low.

HCOB Flash Germany Composite PMI Output Index at 51.0 (Jan: 50.5), 9-month high.

Data Highlights: Business activity in Germany's private sector accelerated in February, with the Composite PMI index rising to a nine-month high, signaling a stronger recovery in economic growth. The Services sector expanded for the third consecutive month, supporting overall economic growth, albeit at a slightly slower pace. Although the Manufacturing sector remained in contraction, its drag on the overall economy eased, with the decline in manufacturing output being the smallest since May of the previous year.

New Orders: Underlying demand for goods and services showed signs of stabilising at the midway point in the first quarter, with total new business recording only a modest decrease that was the weakest in the current nine-month sequence of contraction. It was a similar story for new export business, which recorded the softest rate of contraction since last May. This reflects a modest improvement in overseas market demand. Meanwhile, capacity utilization rates fell, and the backlog of orders continued to decrease, indicating that firms were still working through existing orders.

Employment: Employment in the eurozone's largest economy meanwhile showed a modest fall as job losses in the goods-producing sector offset rising workforce numbers at services firms. Services firms nevertheless reported a rise in workforce numbers for the second month running in February. However, the latest increase was only modest and offset by deeper job cuts in the manufacturing sector, leading overall employment to decrease at a slightly faster rate than in January.

Inflation: Rates of inflation in both input costs and output prices ticked down slightly from the recent highs seen in January. While the services sector continued to face higher input prices due to rising labor costs, the manufacturing sector saw a faster decline in input costs. Overall, firms maintained a strong ability to pass on costs to customers, with the sales price increase in the services sector reaching its highest level in a year.

Outlook: Looking ahead, businesses' growth expectations for the forthcoming year were revised down in February, after having hit an eight-month high in January. Despite some easing in the manufacturing sector, concerns about potential tariffs from the US and global geopolitical uncertainties continued to weigh on business sentiment.

Overall, Germany's February PMI data indicated a stronger economic growth momentum, with the manufacturing sector's downward pressure easing and the services sector maintaining robust growth. However, the weakness in the labor market and a decline in business confidence remain areas of concern. The future stability of the economy will depend on policy adjustments and changes in the global economic environment.

Germany's February PMI

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Justin

Economic

Commodity

Gold is on display at Korea Gold Standard in Seoul, Wednesday.

Copper prices are climbing, propelled by the recent sustained rally of gold and silver amid investors’ preference for safe-haven assets, market watchers said Friday.

Underpinning the upward trajectory is risk-off sentiment, brought on and amplified by Trump tariff uncertainties and delayed hopes of swift easing by the U.S. Federal Reserve.

Many say the relatively undervalued commodity will have further room to increase, unlike gold that nearly peaked before a correction followed by a potential downtrend.

According to the U.S. Commodity Exchange (COMEX), a futures and options market for trading metals such as gold, silver and copper, copper rose 12.29 percent year-to-date.

Silver and gold over the same period increased 14.12 percent and 11 percent, respectively.

Gold exchange-traded funds (ETFs) climbed 47.24 percent last year.

However, the figures for silver ETFs and copper ETFs were limited to 16.43 percent and 1.75 percent, respectively, leaving room for further profit.

A Daishin Securities report said gold is nearing its peak.

“The previous high of $2,946 per ounce is nearly reached. A short-term overshoot to the $3,000 level is possible, but a wave of profit-taking can follow due to pressure from the high level,” the report said.

A Meritz Securities report said strong global copper prices are likely, aided by sustained demand from the U.S. before Trump's tariffs imposition.

“The U.S. move to increase copper storage will drive demand,” the report said.

The Comex April gold contract came to $2,950.90 per troy ounce, Tuesday (local time), up 1.73 percent, or $50.2.

Source: Koreatimes

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S&P Global Inc.

Data Interpretation

On February 21, S&P Global released the February HCOB PMI report for France:

HCOB Flash France Manufacturing PMI at 45.5 (Jan: 45.0). 9-month high.

HCOB Flash France Composite PMI Output Index at 44.5 (Jan: 47.6). 17-month low.

HCOB Flash France Services PMI Business Activity Index at 44.5 (Jan: 48.2). 17-month low.

HCOB Flash France Manufacturing PMI Output Index at 44.6 (Jan: 44.3). 7-month high.

According to the 'flash' HCOB PMI survey, February's fall was sharp and the steepest since September 2023 as the drag from the private service sector intensified. The headline HCOB Flash France Composite PMI Output Index fell deeper into sub-50.0 territory during February, indicating a sharper rate of decline in business activity across the Eurozone's second-largest economy.

Private sector new orders decreased by one of the most marked extents in around five years. Survey respondents in both sectors frequently cited lower client demand in February, despite a fractional uptick in the HCOB New Export Business Index. French companies cut back on inventories and reduced capacity utilization due to weak demand. Backlogged orders were reduced sharply and at the swiftest pace in 15 months.

In terms of the labor market, the decline in staffing numbers was the steepest since August 2020. The non-renewal of temporary contracts and non-replacement of voluntary leavers were methods used by firms to lower headcounts, anecdotal evidence revealed.

In terms of cost, French businesses were challenged by intensified cost pressures in February. Input prices increased at the strongest rate since last August, primarily driven by the rising prices of raw materials and energy. However, a more competitive market prevented businesses from fully passing on cost increases. Prices charged for French goods and services rose only fractionally on the month.

In terms of the outlook, French companies were broadly neutral as expectations of lower manufacturing production were accompanied by a subdued level of optimism across services. Challenging sales conditions, a lack of confidence in pricing power and concerns regarding the health of the underlying economy were cited as reasons to be downbeat towards the year ahead. Despite signs of stabilization in the manufacturing sector, the persistent under-performance of the services sector is likely to act as a drag on the broader economic recovery.

Overall, the French economy slipped deeper into contraction midway through the first quarter, with the services sector showing particular weakness. In the coming months, businesses are expected to closely monitor government policies, market demand, and the global economic environment to assess the likelihood of an economic recovery.

France February PMI

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S&P Global Inc.

Data Interpretation

The S&P PMI data released on February 21 indicates:

The preliminary S&P Manufacturing PMI for Japan in February stood at 48.9, up from 48.7, remaining in contraction range.

The preliminary S&P Services PMI for Japan in February stood at 53.1, up from 53.0, reaching a five-month high.

The preliminary S&P Composite PMI for Japan in February stood at 51.6, up from 51.1, reaching a five-month high.

The latest PMI report indicates that Japan's Composite PMI Output Index rose to 51.6 in February, up from 51.1 in January, signaling an eighth consecutive month of private sector expansion, reaching a five-month high. Economic growth was primarily driven by the services sector, while manufacturing sector remained subdued.

In the services sector, the Business Activity Index increased to 53.1, marking the fourth consecutive month of expansion for the sector, with the fastest growth rate since September of the previous year. Companies generally attributed the growth to business expansion initiatives and improved demand. Despite a slight slowdown in new business growth, overall demand remained robust. Corporate hiring increased for the seventeenth consecutive month, aiding in the management of outstanding orders. However, due to labor shortages and cost pressures, service sector companies' confidence in the next 12 months fell to its lowest level since January 2021.

In the manufacturing sector, the manufacturing PMI saw a marginal increase from 48.7 to 48.9, yet it remains in contraction range. While the declines in output and new orders have moderated, the industry continues to experience a downturn. Manufacturing employment contracted for the first time since November of the previous year, attributed to weak market demand. Corporate procurement activities decreased, leading to further inventory drawdowns. Furthermore, confidence regarding future prospects has plummeted to its lowest point since June 2020, signaling a cautious outlook among manufacturers.

Regarding the labor market, there is a noted labor shortage. The rate of employment growth within Japan's private sector has decelerated, reaching its lowest level in over a year. Although the service sector continues to expand and increase hiring, the job losses in manufacturing have partially offset these gains.

Concerning inflation, the rate of input cost inflation has largely remained at the elevated levels observed in January. Businesses have reported persistent high costs for raw materials, transportation, and labor. Despite these rising input costs, the increase in companies' selling prices has slowed, reflecting the dampening effect of market demand on price transmission.

Looking ahead, Japanese corporate sentiment deteriorated further in February, reaching its lowest point since 2021. Persistent inflationary pressures, labor shortages, and global economic uncertainty continue to challenge the business outlook. While the service sector remains a pillar of economic growth, the sustained weakness in manufacturing could impede the overall recovery.

Overall, the Japan's February PMI indicates a slight acceleration in economic expansion, but manufacturing remains subdued, and business confidence has declined significantly. In the coming months, the market will be closely monitoring government policies, shifts in global demand, and inflationary trends to assess the sustainability of the economic recovery.

Japan's February PMI

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