Surveys decelerate but economic momentum remains robust

While February economic surveys suggest some slowing, latest PMIs continue to signal solid economic expansion.

In particular, February flash PMIs, while losing momentum, remain close to historic highs and suggest broad-based expansion among Eurozone members in the services and manufacturing sectors.

Overall, current levels are in line with a 0.9% quarterly GDP growth, which is higher than the current ECB target of 0.5%. Second, we are not too worried by the lower readings in the German IFO survey, which remain on an upward trend.

Overall, we remain comfortable with our baseline scenario of 2.4% GDP growth this year, with current levels of activity consistent with solid private sector investment and new job creations.

As to inflation, the core CPI index was confirmed unchanged at 1.0% YoY but the super core inflation rate – an index based only on those items in HICP excluding food and energy that are sensitive to the output gap – surprised to the upside with a 0.1pt gain. Nevertheless, inflation pressures remain low.

Gero Jung – Chief Economist – Mirabaud AM