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Pan-European PMI surveys highlight tough times for manufacturing

Manufacturing continues to shrink in France, Germany and the UK but growth in latter’s services sector could yet save the UK economy from recession.

24 January 2024

The downturn continues across the Eurozone, with flash composite PMI numbers in the Euro area’s two largest economies, France and Germany, both showing contraction in January. France’s manufacturing PMI figure of 43.2, while better than the previous month’s reading of 42.1, highlights that the sector has been in contraction for a full year now – the last reading above 50 was back in January 2023. German manufacturing fares even worse on the face of it, with the sector firmly in contraction since July 2022. Depressing as these numbers seem, they were actually better than forecast, if that is some scant reward, and even though they were both in contractionary territory, they are moving higher incrementally month-on-month towards expansion. The direction of change is positive, but the overall story is not quite, yet.

Meanwhile in the UK, PMI data shows manufacturing in a similar funk to that seen in the Eurozone, one it has been in since August 2022, with a contractionary reading of 47.3 (albeit better than the 46.7 forecast). On the other hand, UK Services PMI continued to grow - for the third month running - and remains the bright spot in an otherwise beleaguered overall economy with a better-than-expected reading of 53.8. This may well be enough to allow the UK economy to avoid a technical recession.

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The information in this document is given for information purposes only and does not qualify as investment advice. Opinions and assessments contained in this document may change and reflect the point of view of GAM in the current economic environment. No liability shall be accepted for the accuracy and completeness of the information. Past performance is not an indicator for the current or future development.

Charles Hepworth

Investment Director
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