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Our first growth estimates for the opening quarter of the new
decade point to a continuation of meagre expansion across the
European economy, although there are further signs that the recent
downturn is bottoming out.
Of note, Germany looks set to record a stronger performance than
in the fourth quarter, largely thanks to renewed strength in its
more domestic-facing services economy. January PMI data showed
activity rising at its best rate for five months, supported by
firmer gains in new work and rising employment. However, with
industrial recession persisting - the respective manufacturing PMI
improved in January but remained well below the crucial 50.0
no-change mark - expect growth to remain weak at best and reflected
by the initial Q1 2020 nowcast of 0.05% q/q expansion.
France meanwhile is maintaining expansion, with the headline PMI
moving down only slightly in January. Growth is estimated to be
running at a level of just below 0.4% q/q, a little slower than the
previous quarter's punchy performance, but nonetheless on track for
a robust gain.
Outside of the biggest two eurozone economies, we presently see
Italy inside negative territory
(-0.1% q/q) although we await next week's January PMI data for a
better steer on underlying economic performance at the start of the
new year.
With Italy continuing to drag on regional output, and Germany
only just inside growth territory, we anticipate another quarter of
slight expansion at the overall euro area level (nowcast: +0.08%
q/q).
Meanwhile, further signs of a release of pent-up demand in the
UK following the decisive election outcome in early December are
sure to provide some food-for-thought for the Bank of England as it
mulls over a possible rate cut at the end of January.
Adding to earlier evidence of strengthening housing and labour
market activity, PMI figures for January showed positive momentum
across activity, new orders and employment variables. Confidence
about the future hit its highest level in over four-and-a-half
years.
All this added up to a Q1 2020 nowcast estimate of +0.2% q/q for
the UK, a subdued rate in isolation, but nonetheless a notable
improvement in underlying performance compared to previous
quarters.
Next Nowcast Update: February 5th 2020
Joe Hayes, Economist, IHS Markit
Tel: +44 1491 461006
joseph.hayes@ihsmarkit.com
Paul Smith, Director, IHS Markit Tel: +44 1491 461038
paul.smith@ihsmarkit.com
Purchasing Managers' Index™ (PMI™) data are compiled by IHS
Markit for more than 40 economies worldwide. The monthly data are
derived from surveys of senior executives at private sector
companies, and are available only via subscription. The PMI dataset
features a headline number, which indicates the overall health of
an economy, and sub-indices, which provide insights into other key
economic drivers such as GDP, inflation, exports, capacity
utilization, employment and inventories. The PMI data are used by
financial and corporate professionals to better understand where
economies and markets are headed, and to uncover opportunities.
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