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German PMI Hits 2-Year Low Despite Beating Expectations; Euro Outlook Bleak

German PMI Hits 2-Year Low Despite Beating Expectations; Euro Outlook Bleak

2011-10-03 09:23:00
David Schutz,

German PMI manufacturing came in marginally higher than projected, weighing in at 50.3 to beat the expected mark of 50.0, and deteriorating from August’s 50.9. The projection kept Germany’s toe in the expansion zone, just above the crucial line of 50 which marks the cutoff into contraction. Today’s numbers mark the lowest PMI reading in two years, continuing the downward trend since the PMI reached a high of 62.7 this February. Markit’s spokesperson Williamson blamed the low numbers on reductions in exports and domestic demand, referencing a decrease in export orders which doesn’t bode well for future readings.

Although most euro-region economies performed slightly better than expected, the euro-zone as a whole remained locked in contraction at 48.5, grounded by France and Italy at 48.2 and 48.3, respectively. The UK finished strong at 51.1, beating out the projection of 48.5 while Switzerland crashed at 48.2 after a projection of 50.5 and last month’s 51.7. Despite the decent looking readings the general deterioration being witnessed in the region at present comes at the worst time as officials struggle to find a solution to the EU debt crisis and Greece; a default now being a question of ‘when’ not ‘if’.

In addition, with global growth slowing to an ebb in Q4 2011 and Germany so exposed to these fluctuations through their massive export sector the outlook for the EMUs largest and most robust economy is turning gloomy. Ordinary German citizens have already shown their disgust at sending taxpayer money abroad to bailout their irresponsible neighbors and German FinMin Schaeuble emphasized over the weekend that Germany would make no further contributions to the EFSF. The future for Germany and the entire region does not look good.

GermanPMI_body_eur.png, German PMI Hits 2-Year Low Despite Beating Expectations; Euro Outlook Bleak

The reaction in the euro was muted as investor focus remains elsewhere. On a longer term basis, however, we see the euro continuing its declines toward the 1.3000 level before finding some support. After consolidating around this psychological level we believe that this move to the downside could extend further toward the 1.2000 region, fundamental weakness in euro-area supports this outlook. For full technical outlook.

Written by David Schutz, DailyFX Research Team

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.


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