Supported by hawkish PMI surprise – Danske Bank

Danske Bank’s Danske Research Team reports that Euro area PMIs surprised on the upside, with the composite index and manufacturing back above 50, the highest since the ECB began hiking. Rising manufacturing price indices and still-elevated negotiated wages are seen as a hawkish surprise that supports the ECB’s stance and underpins the Euro near term.

Euro area data backs ECB stance

“In the euro area, the February flash composite PMI rose to 51.9 (cons: 51.5), driven by manufacturing PMI at 50.8 (cons: 50.0), its highest level since ECB started hiking rates in 2022.”

“The rising price indexes in the manufacturing sector suggest some goods price pressures are slowly emerging.”

“Overall, the data was a hawkish surprise, supporting the ECB’s “good position”.”

“Additionally, the ECB’s negotiated wages indicator rose to 2.95% y/y in Q4 from 1.9% y/y in Q3 driven by one-off inflation compensation payments rather than signalling renewed wage pressures.”

“Wage growth continues to cool as labour demand eases, with the broader ECB-preferred compensation per employee measure, due 6 March, offering a fuller picture.”

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)