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Today Eurozone PMI reports triggered fears about a recession. According to analysts at Wells Fargo, the manufacturing has weakened considerably, but services (more relevant) have been more resilient. However, they find it hard to get excited about European prospects.  

Key Quotes:  

“Fears of a Eurozone recession are back in the headlines today after a series of disappointing PMI figures from the currency bloc. The March manufacturing PMI declined more than expected to 47.6, the lowest level since 2013.”

“The continued decline in the manufacturing PMI in the first three months of 2019 suggest the weakness in the hard data for the sector probably persisted in the first quarter. Fortunately, the Eurozone economy is primarily based on services, which account for roughly 75% of total value added in the economy, rather than manufacturing, which accounts for less than 20%. The services PMI for the overall Eurozone economy has been more resilient in recent months, recovering to 52.8 in February and edging only slightly lower in March to 52.7.”

“We find it hard to get excited about European economic prospects. Despite its relative resilience, the services PMI still remains low at just 52.7, while the composite PMI at 51.3 is consistent with GDP growth of just over 0.1% quarter-over-quarter.”

Our lack of enthusiasm for the Eurozone economy extends to the euro, as we currently look for the euro to remain essentially flat-line over the next few months. We still look for some modest euro gains by year-end and into 2020, but that view is predicated on the Eurozone economy avoiding recession and the European Central Bank eventually normalizing interest rates.”