Eurozone PMIs - what's next for economic growth
Composite PMI
Services PMI
Manufacturing PMI
Insights
CONCEPT
The Purchasing Managers' Index (PMI) is a leading indicator of economic health. Based on monthly corporate surveys, it gauges forward-looking momentum. A reading above 50 signals expansion, while a reading below 50 represents contraction.
CURRENT READINGS
The EU Composite PMI (services, manufacturing and construction together) is at 52.1, signaling an expected solid growth in the wider economy, improving since last month (in a positive quarterly trend). Beneath the surface, the two main sectors show distinct trajectories:
- Services (Largest GDP Contributor): 51.7 — signaling a fair expansion.
- Manufacturing: 52.8 — signaling a strong growth.
MECHANICS & MEANING
A robust expected expansion should anticipate stronger earnings: it is bullish signal for stocks.
In general, rising PMIs translate into higher growth prospects in the short-term (in 3 to 6 months), which should later translate into higher corporate earnings, supporting bullish equity sentiment. Conversely, contracting PMIs signal economic headwinds and defensive market rotations. Normal, range-bound fluctuations do not provide a meaningful, directional signal for trading.