Things are going from bad to worse for the eurozone’s economy at present, with the German manufacturing PMI reading dropping to 49.9 in January from 51.5 in December. The markets had been expecting a more modest dip to 51.3. The news is extremely disconcerting as any figure below 50.0 shows that the sector is contracting. It is the first contraction since November 2014.
The services sector saved the day as it so often does, rising to 53.1 in January from 51.8 the previous month and above expectations of 52.1. In the eurozone, manufacturing PMI dropped to 50.5 from 51.1, while services PMI dropped to 50.8 from 51.2. The ECB kept rates on hold, and Draghi used the press conference to say that the risks surrounding eurozone growth have moved to the downside. He acknowledged that significant monetary policy stimulus remains essential.
Today we will have the German Ifo business climate reading for January which is expected to dip a little to 100.6 from 101 the previous month.