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Eurozone manufacturing slides into contraction – “plunging German confidence is contagious”

Ulas Akincilar

Eurozone Manufacturing PMI has fallen into negative territory for the first time since 2013, the following reaction may be useful. Contributor Ulas Akincilar, Head of TradingINFINOX.

For years, European manufacturing was much like the football World Cup – there was always a sense of the inevitability of German triumph. No longer.

Germany’s manufacturers have been hit by a triple whammy of falling Chinese demand, concerns over a hard Brexit and increasing protectionism.

In a country where exports make up half of GDP, this has skewered business confidence. Germany’s manufacturing PMI score is now the lowest it has been for more than six years, and its plunge in confidence has proved contagious.

Across Eurozone manufacturing as a whole, both output and confidence slipped into negative territory in February. With economic growth sputtering in the bloc, fears that the slowdown could morph into an outright decline are sounding increasingly credible.

Yet with inflationary pressures growing, the ECB has limited scope for monetary stimulus – even if it wanted to restart its money presses, which have barely cooled since they were turned off at the end of 2018.

Such bleak news is sending the Euro sliding back towards the abject lows against the Dollar it saw at the start of the week.

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