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Eurozone PMI weakens but German Unemployment Improves

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Markit Economics has just published the Eurozone Manufacturing Purchasing Managers Index (PMI). This figure is 53.0 missing last months 53.2 but matching consensus estimates of 53.0.

Spain, Italy, France and Germany have also published their individual PMI numbers this morning and this offers some insight into the spread of manufacturing conditions across some of the larger core EU economies. Spain reported, 52.8, French figures were 52.1 , Italian PMI numbers were 52.4 while the important German data read in at 53.7. Interestingly of these only Germany missed expectations. British PMI figures are due later this morning.

Germany has also just published their unemployment rate for March, this came in at 6.7% against a February figure of 6.8% and a consensus estimate figure of 6.8%. These figures are slightly improved and bode well for the EU unemployment data due at 9am GMT this morning.

Although these figures auger well for activity within the Eurozone, markets are still getting to grips with yesterday’s dramatic fall off in inflation. The early stages of this economic recovery are in train, yet inflation has just fallen to a four year low within the Euro area. At 0.5%, inflation is at just one quarter of the European Central Banks stated target of 2% and perilously close to 0%. This is a long way from the ECBs projections of 1% this year, 1.3% in 2015 and 1.5% in 2016.

The pain of low inflation will no doubt be felt by all European economies but particularly at risk are the periphery countries. Low inflation ultimately kills employment it also makes debt repayment more expensive. Portugal, Ireland, Greece and even Italy all have government debt levels running at greater than 100% of GDP, additionally unemployment in these regions is still well into double digits. Granted it is these periphery countries that are dragging down the overall EU inflation rate, but this is just further evidence of the two speed European recovery with which the ECB is dealing.

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