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Little To Excite From The Eurozone

Published 07/24/2014, 04:04 AM
Updated 05/14/2017, 06:45 AM

Little To Excite From The Eurozone

With a plethora of peripheral pecuniary data out for the Eurozone later today, there is plenty to interest any economist with slight interest in the future of the EU. Looking at the historical trends of these figures makes for difficult reading and leaves little to get excited about.

Spain’s unemployment rate, currently at 25.4%, is possibly the worst of all the economic data in the whole EU, so it’s a good thing we are getting that out of the way first, at 07:00 GMT today. To be fair to Spain, this is not the worst it has been. April 2013 saw the rate peak at an eye watering 26.2% after a crippling five year recession. The rate has steadily come down since then and may actually drop further. So this could be one of the only good pieces of news for the EU today.

Spain Unemployment Rate

Spain Unemployment Rate

At the same time the Preliminary Manufacturing and Services PMIs for France are released. These reports have had a troubled time over the last three years, with the beginning of 2014 providing a glimmer of hope. This hope was dashed when both PMIs began trending into contractionary territory throughout the current year. The current manufacturing PMI of 48.2 is expected to lift to 48.5, and the services PMI is tipped to lift also from 48.2 to 48.9. However, as we know, below 50 is not a good place to be, so these will not be something to get excited about.

French Manufacturing PMI (White) and Services PMI (Green)

French Manufacturing PMI

Half an hour later (07.30 GMT) sees Germany release its Manufacturing and Services PMIs. The good news for the Euro is that these are expected to stay above 50, with 52.2 and 54.7 respectively and they arealso expected to rise. Manufacturing figures have followed a similar path to the French figures, with 2014 proving to be discouraging months as well, however, German services haven’t suffered as much. German manufacturing PMI peaked in January at 56.5 with services peaking in May at 56.0. Do not expect these figures to excite either. If they follow the recent trend, they will be disappointing, with the exception of the service. Maybe.

German Manufacturing PMI (White) and Services PMI (Green)

French Manufacturing PMI

To round off a (potentially) disappointing hour for the Euro, the EU manufacturing and services PMIs are reported at 08:00 GMT. The trend with these two are same as with the German and French data (no surprise really, since Germany and France make up half of the EU). The peak for manufacturing was in January with 54.0 and services peaked in May with 53.2. The market expects manufacturing to lift slightly and services to fall. Again if we look at the last few months, we should not expect too much on the positive side as the trends are worrying.

Eurozone Manufacturing PMI (White) and Services PMI (Green)

French Manufacturing PMI

The Euro has certainly felt the effects of these disappointing results over the course of this year, and the bullish trend line was a casualty. With the stimulus package released in June, the European Central Bank (ECB) will be hoping this will filter through to the PMI indicators. If they are on the downside of the markets expectations, the Euro is going to be punished by the markets. This will add to the speculation of further stimulus to come and a subsequent weaker Euro, with the bearish channel likely to hold on for longer.

EUR/USD Daily Chart

If the last few months are a sign of things to come, we could see disappointing figures all round and the Euro will feel the heat.

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