Eurozone January final manufacturing PMI 46.6 vs 46.1 prelim

• Prior 45.1

It’s a decent improvement with manufacturing conditions seeing an uptick in France and Germany especially. That said, they’re still well in recession territory so I wouldn’t pin this as the turning point in the recovery just yet. Trump tariffs will be a key factor to be mindful of in the months ahead and that could really stifle any turnaround in sentiment. HCOB notes that:

“It’s definitely too early to talk about green shoots in the manufacturing sector, but we see the increase in the HCOB PMI as
a first step towards stabilisation, ending two months of the deepening of the recession.

“Higher input prices are a challenge for the manufacturing sector, given its weak economic position over the past two years.
These higher input prices, partly due to average oil prices rising by almost 7% in January, could also pose a challenge for
the ECB, as the previous easing of overall inflation was largely due to lower energy prices.

“Even though the new US administration will likely hit the European manufacturing sector and its export industry with tariffs
and other measures, confidence in the future has made a remarkable jump. The index for future output is four points higher
and slightly above its long-term average. Maybe there’s hope that the lethargy is ending, with general elections in Germany
and possibly France, and a climate of “the time is ripe to change things and get things done.”

“Germany and France hold the red lantern in the eurozone’s manufacturing sector, with Austria and Italy not faring much
better. At least the manufacturing recession has slowed somewhat in all these countries, and this applies across a broad
range of sectors. In Germany and France, the situation for capital goods, intermediate goods, and consumer goods is no
longer as dramatic as it was the previous month. It’s possible that things will improve further this year. Despite all of Trump’s
tariff threats, we must remember that for most countries in the eurozone, 90% or more of exports go to countries other than
the US.”

This article was written by Justin Low at www.forexlive.com.