Could the worst slump in UK services PMIs in two years be a leading indicator for the Eurozone?


Santander Corporate & Research | The worst slump in UK services PMIs in two years, since the 2021 confinements, puts a clear question mark over the sustainability of an expected EZ economic recovery that explains the good momentum in credit markets. True, with these PMIs already above 50pt for the first time since June and the third consecutive month of improvement, our economists believe that the EZ may be able to ride out the recession. But, with the Main at 78bp, they are already discounting economic growth of 1% in the first half of 2013. Add to this a €Stoxx600 rally of c7% YTD. Returning to the UK, it is worth remembering that this country was ahead of the rest of Europe when it came to reopening its economy, something that would explain why the positive effects started to dissipate earlier, also when it came to raising rates and, finally, also in the fiscal turnaround after the brutal crisis in September. Moreover, the recovery on the supply side, visible in France’s manufacturing PMIs and generally in the downward adjustment in input costs, gives way to doubts about the strength of demand, with services PMIs falling to 22-month lows as our economists point out (49.2, 49.8e, 49.5p).

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