Is the appreciation of the Euro negatively impacting businesses in the Euro-zone? It depends on who you ask. The purchasing managers index (PMI) for the manufacturing sector dropped down to a reading of 51.5 from 53.2 as new orders and output lagged amidst softer export demand.
While this indicator still indicates expansion, this PMI reading marks the fourth consecutive decline in activity, suggesting the sector is facing a marked slowdown. On the other hand, PMI for the services sector proved to be far more optimistic at 55.6 – up from 54.2 – as healthy labor markets help fuel domestic demand. The release of the German IFO surveys on Thursday will provide additional information regarding investor sentiment, as indications that businesses remain leery of credit conditions could prevent the ECB from taking on a staunchly hawkish tone.