Eurozone Manufacturing Is Still Contracting – But More Slowly

Eurozone Manufacturing Is Still Contracting – But More Slowly

about 4 years ago2 mins

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A survey out late last week showed manufacturing activity in the eurozone is still contracting – but the rate of decline did slow in February. More like Phew-bruary, amirite? 😅

What does this mean?

The uptick in manufacturing was mostly down to the easing of an extended slump in Germany – the eurozone’s largest manufacturer and the country most affected by the goings-on in China 🇩🇪 There was good news for the bloc’s larger services sector – i.e. non-manufacturing jobs – too: it proved its own mettle as it hit a six-month high. That’s fuelling hopes the recent economic weakness in the eurozone won’t descend into a full-blown recession.

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In the UK, meanwhile, business activity continued to expand at much the same pace as in January. And after growth flatlined in the last three months of 2019, it’s those two back-to-back months of expansion that are raising investors’ hopes for a newly energized British economy 🔋

Why should I care?

The pickup in activity in the eurozone and UK is in sharp contrast to Asia, the region hit the hardest by the coronavirus outbreak. Key measures of business activity in Australia and Japan slumped, with data showing the worst deterioration in Japanese manufacturing activity in seven years. Investors’ biggest fear now is that the downturn will spread elsewhere: some European carmakers, for example, have already been hit by supply chain problems 🚘 That’ll add to the pressure on central banks worldwide to up support for their economies, but with global interest rates currently at historic lows, they might not be able to do much.

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European carmakers got some more tough news last week: car sales in China have dropped 92% so far in February. Maybe those companies should start looking into the tractor business instead: Deere & Co, the world’s largest agriculture equipment manufacturer, reported an unexpected jump in profit in the last three months, as American farmers splashed more cash following the US-China trade truce.

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