To say the start of 2019 has not been great for the eurozone would be a bit of an understatement. Italy, France and Germany are all struggling, with a raft of purchasing managers’ indices dropping an alarming amount. It wasn’t all that long ago that PMI figures were hovering around the 60.0 mark, but now they are closer to 50.0. Any figure below that shows a contraction and some recent releases from Germany have flirted with that level.
Yesterday poured salt into the wound, as German factory orders unexpectedly dropped by 1.6% in December. An increase of 0.3% had been expected by the markets. The news came just hours after Deutsche Bank had issued a stark warning that the German economy is drifting towards a recession. They said that they expect the German economy to contract in the first quarter of 2019. Economists at the bank are yet to revise their 1% growth forecast for the year, but that does not mean to say they won’t. The next few months will be fascinating.
Construction PMI from Germany in January compounded the problems, as it dropped to 50.7 from 53.3 the previous month. That is extremely close to stagnation and, although Markit said that construction firms were hit by bad weather last month, it is the fastest rate of decline in almost six years. Let us see what happens when the sun puts her hat on.
The President of the European Council, Donald Tusk, sent a tweet that courted controversy, as he wondered what the special place in hell looks like for those who promoted Brexit without a plan. The sentiment will no doubt divide opinion like everything does these days, but it is rather startling such a senior figure has chosen to say such a thing. Perhaps it is symptomatic of his frustration.
The US trade gap narrowed by more than expected, but this was brought about by a big drop in imports, rather than a jump in exports. Still, the deficit is narrower than economists had expected and Trump will no doubt be happy about that. Today we will see the Bank of England’s interest rate decision and Theresa May is flying into Brussels to seek concessions.
There are 50 days to go to Brexit.
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