Germany's February PMI: Economic Growth Rebounds as Manufacturing Drag Eases

Data Interpretation

Summary:

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

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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Glendon

Economic

Forex

The EUR/USD pair is hovering around 1.0503, extending its rally since midweek. The major currency pair has climbed to a two-month high, with market sentiment favouring further gains.

Key drivers behind EUR/USD’s rise

A decline in US Treasury bond yields has weighed on the US dollar, following a series of weaker-than-expected US economic reports and dovish remarks from Federal Reserve officials.

Austan Goolsbee, President of the Federal Reserve Bank of Chicago, stated that he does not expect the Core Personal Consumption Expenditures (PCE) index to be as concerning as the recent Consumer Price Index (CPI) data. As a key inflation measure for the Federal Reserve, the Core PCE significantly influences monetary policy expectations.

Meanwhile, St. Louis Fed President Alberto Musalem warned of stagflation risks and the potential challenges in setting future policy.

The latest US jobless claims data further raised concerns, showing an increase to 219,000 from the previous 213,000, exceeding the forecast of 214,000.

In the eurozone, the euro could see further upside if the German election outcome triggers additional short-covering in EUR/USD.

Technical analysis of EUR/USD

On the H4 chart, EUR/USD has completed a growth wave to 1.0470, forming a consolidation range around this level. The market has since broken higher, paving the way for further gains towards 1.0544. A correction towards 1.0385 may follow after reaching this level. The MACD indicator supports this scenario, with its signal line above zero and pointing upwards, indicating continued bullish momentum.

On the H1 chart, the pair executed a growth wave to 1.0470, followed by a narrow consolidation range around this level. The likelihood of an upward breakout towards 1.0520 remains high. After reaching this level, a correction to 1.0470 could occur before the growth wave resumes towards 1.0544. The Stochastic oscillator confirms this outlook, with its signal line above 80 and trending towards 20, suggesting a possible pullback before further gains.

Conclusion

EUR/USD remains in an uptrend, supported by weakening US Treasury yields and a cautious Fed outlook. If bullish momentum continues, the pair may extend gains towards 1.0544. However, a corrective move could follow before further upside. The outcome of the German election could also influence short-term price action, potentially driving additional volatility.

Source: ACTIONFOREX

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Warren Takunda

Economic

The Pound-to-Euro exchange rate (GBPEUR) jumped to 1.2080 after the ONS said retail sales rose 1.7% month-on-month in January, breezing past expectations for a print of 0.3% and recovering from December's dismal -0.6%.

The Pound-to-Dollar exchange rate rallied to a new two-month high at 1.2678 after markets pared back bets for a Bank of England rate cut in March.

Retail sales growth now stands at 1.0% year-on-year, better than the 0.6% markets anticipated.

"Retail sales data for January provided some good news, showing some decent growth - well above expectations. The economy is proving to be a conundrum for policy makers at the moment. There is no doubt it could do with some stimulus, but inflation is a concern, and this data suggests the consumer is in a healthy state whilst confidence levels show the opposite," says Neil Birrell, Chief Investment Officer at Premier Miton Investors.

Pound Sterling Rallies Against Euro and Dollar on Retail Sales, Borrowing Surprises_1

However, the Pound's upside potential will be curbed by the details in the report, with Charlie Huggins, an analyst at Wealth Club, saying they are not as good as they first appear.

He explains the recovery was largely due to a significant recovery in food sales. Non-food stores saw sales decline by 1.3%, with clothing sales especially weak, "hardly a sign that consumers are feeling flush."

"The large increase in food sales is clearly a positive for supermarkets, but it may be a worrying sign for other parts of the economy. More people eating at home is especially bad news for restaurants, pubs and bars. These sectors are in dire need of footfall, with their costs set to rise significantly in April following the Autumn Budget," says Huggins.

He warns that few retailers will cheer these figures.

Tax Boost for Reeves

The UK government recorded a surplus of £15.442BN in January said the ONS, thanks to a £117.6BN tax haul in January 2025, an increase of £7.8BN compared to January 2024.

This was largely driven by an increase in self-assessment taxes of £36.2BN, making for the highest January figure on record.

Unfortunately for Chancellor Rachel Reeves, the surplus was £5.1BN lower than the £20.5BN forecast by the Office for Budget Responsibility (OBR) in October 2024.

Still, the current budget balance (day-to-day public sector activities) was in surplus by £24.6BN, the highest since records began in 1997.

Markets Pare Back Rate Cut Bets

The Pound extends a short-term recovery on the back of these data developments as markets reduce expectations for the number of cuts to come from the Bank of England this year.

The market now sees just two cuts as robust demand - as per these retail sales data - suggest additional easing risks exacerbating rising inflation.

This week, the ONS reported inflation unexpectedly rose 3.0% y/y in January and economists warn it is now on course to breach 4.0%, making it harder for the Bank of England to explain why it is cutting interest rates when inflation is running away from the 2.0% target.

The strong retail sales outturn reflects rising wages and a still healthy labour market. This could, however, all change in the spring when national insurance hikes and minimum wage rises are foisted on businesses.

"We expect the pound sterling to remain robust short term as the UK’s rate advantage over European peers rises," says David Alexander Meier, Economic Research analyst at Julius Baer.

Julius Baer thinks the Bank of England will likely remain cautious, holding rates in March. "The BoE's slow pace of cuts will temporarily widen the pound's interest rate advantage," explains Meier.

The Swiss bank sticks to its short-term optimistic outlook on the pound with a 3-month target of EUR/GBP 0.82, with strength likely to fade as the rate advantage narrows later this year.

This translates into a GBP/EUR equation of 1.22.

Source: Poundsterlinglive

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S&P Global Inc.

Data Interpretation

On February 21, the February S&P PMI was released:

Flash Australia Manufacturing PMI: 50.6 (Jan: 50.2). 27 month high.

Flash Australia Services PMI Business Activity Index: 51.4 (Jan: 51.2). 6-month high.

Flash Australia PMI Composite Output Index: 51.2 (Jan: 51.1). 6-month high.

At 51.2 in February, up from 51.1 in January, the headline seasonally adjusted S&P Global Flash Australia PMI Composite Output Index signalled a fifth successive monthly expansion in private sector output. While modest, the rate of expansion was the most pronounced since last August.

In the services sector, the Business Activity Index rose to 51.4 in February, accelerating for a third consecutive month, with the latest rise attributed to greater inflows of new business. In comparison, manufacturing output rose only fractionally. However, businesses generally held a cautious view of the future economic environment, leading to a decline in business confidence. Rising labor costs continued to fuel input cost inflation in the services sector.

The Manufacturing PMI index rose to 50.6, indicating a slight increase in manufacturing output, albeit at a slower pace than the services sector. The Manufacturing Production Index fell from 50.5 to 50.1, signaling a slowdown in manufacturing growth. Notably, manufacturing new orders resumed growth for the first time since November 2022, indicating an improvement in market demand. However, manufacturers remained cautious in hiring, with manufacturing employment declining for the second time in the past three months.

In terms of the job market, employment levels in Australia's private sector continued to grow for the second consecutive month, consistent with the trend in new business and overall output. Employment growth was faster in the services sector, while hiring in the manufacturing sector remained sluggish. Meanwhile, both business inventories and backlogs of work declined, indicating that some firms were still working through their previous production backlogs.

Turning to prices, input cost inflation climbed for a third consecutive month in February, rising to the highest rate since last September. Panellists often mentioned higher material, energy, financing and wage costs. Australian private sector firms continued to share their cost burdens with clients, leading to another increase in average selling prices. The rate of inflation eased to match the series average, however, as firms were unwilling to fully pass on cost increases amidst heightening competition.

Looking ahead, February's S&P Global Flash Australia PMI data outlined further improvements in private sector business conditions. However, a fall in business sentiment to the lowest level since last October provided mixed signals for near-term economic performance. Concerns listed by survey respondents included the impact of still-elevated interest rates and uncertainties surrounding both the domestic and global economy. The moderate recovery in manufacturing and weak export demand may continue to weigh on overall growth. However, with the ongoing expansion of the services sector and potential policy adjustments, there is still hope for Australia's economic recovery.

Overall, Australia's February PMI data indicates that while the growth momentum has strengthened, the economy still faces challenges from inflationary pressures and declining business confidence. In the coming months, the market will closely monitor policy directions and the recovery of global demand.

Australia February PMI

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