More optimism in Germany and France

Author: Konrad Potocki
More optimism in Germany and France

Not all forecasts of an economic slowdown have to come true. In fact, more optimistic news is coming from Germany and France, the largest European economies and 'engines' of the European Union.

According to the latest February Purchasing Managers Index (#PMI), economic activity in these countries increased. The PMI is a highly reliable business cycle index, which measures purchasing activity of managers in various sectors of the economy. The rise in the indices in the countries mentioned above is also good news for supply chains, as it could mean some recovery for European suppliers Germany and France.

And what does this look like in actual figures? Over the Rhine, the #PMI came in at 51.1 points in February, which experts regard as an unexpectedly good result. Firstly, because the forecast was lower (50.4), and secondly, any reading above 50 points means economic growth. And it is linked to a country’s #GDP growth.

As Phil Smith, an economist at S&P Global Market Intelligence, comments, the published data could be indicative of Germany’s return to growth. For the first time in eight months, anyway. PMI rises have not been recorded since July 2022.

Smith believes that, in the case of the service sector, the rise can be explained by demand and, in the case of industry, by the reduction of bottlenecks in supply chains. This is because it is still difficult to find new orders in manufacturing. Although, as we mentioned, the growth in the economy may also increase deliveries to Germany.

In contrast, the latest PMI for France is 51.6 points, but, as in Germany, the services sector is performing better, while the industrial sector rather suggests a slowdown.