Euro Sets Fresh 2-Year Lows as Manufacturing and Service Outputs Shrink
THE TAKEAWAY: EC PMI Manufacturing down to 45.0, PMI Services down to 46.5 -> German business confidence slows on worries over Greece -> Euro sets new 2-year lows
It’s more bearish news for the Eurozone as production and manufacturing sectors both dropped in May more than expected. The purchasing managers index for manufacturing was down to 45.0 from 45.9 in April, instead of an expected rise in manufacturing. The composite index for services was down to 46.5 from 46.9 the previous month, instead of the expected 46.7, according to Markit Economics. Any level underneath 50 indicates a contraction.
Europe’s biggest economy and main backer of austerity contributed to the manufacturing drop. Germany’s index for manufacturing came in at 45.0 for May, way below the expected 47.0. However, Germany’s services output improved as the PMI came in at 52.2, above the expected 52.0 for March. Earlier today, France’s services and manufacturing were both reported to be contracting faster than expected.
The drop in output could support those who want to scale back austerity measures in Europe and instead stimulate growth to battle the severe debt levels.
The debt crisis seems to be worrying German businesses. German IFO current assessment came in lower than expected at 113.3 for May. IFO expectations was also at a lower than expected 100.9. The negative German manufacturing and business confidence follows an earlier confirmation of the country’s economic expansion in Q1 of this year.
EURUSD set new 2-year lows at 1.2515 following the weak PMI’s before snapping back up above the previous support level at 1.2544.
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