Growth Looks Like It's Slowing in Europe as US Dollar Slump Alters Export Game

Frankfurt (Feb 21)  Economic activity in the Eurozone slowed modestly this month, according to private sector data published Tuesday, as countries around the world adjust to the reality of a weaker U.S. dollar and persistently low inflation.

IHS Markit's closely-watched Composite PMI index slipped to 57.5 in February, the group said, down from a final January tally of 58.8 but firmly above the 50-point mark that generally separates growth from contraction. Weaker-than-expected readings were also issued for the region's two biggest economies -- France and Germany -- with some of the slowdown pegged to the euro's 3% year-to-date rise against the greenback.

"February saw the Eurozone's growth spurt lose a little momentum, but the rate of expansion remains impressive, putting the region on course for its best quarter for almost 12 years," said IHS Markit's chief economist, Chris Williamson. "The PMI readings for the first two months of the quarter generally provide a reliable guide to official GDP growth, and indicate that the eurozone economy is expanding at a quarterly rate of 0.9% in the opening quarter of 2018."

The IHS report on Germany, the world's third-largest exporter, noted that, "despite remaining robust overall, rates of growth slowed across both manufacturing and services to the weakest for seven and six months respectively" and said the "latest rise in manufacturing new export orders was the least marked for 12 months."

While still robust, the pullback nonetheless illustrates the impact the dollar's recent weakness has had on growth prospects in some of the world's biggest economies. Earlier Wednesday, the IHS Markit/Nikkei Japan Manufacturing Purchasing Managers Index for February fell to 54.0 from 54.8 in the previous month, with chief economist Joe Hayes noting that "recent yen appreciation has coincided with slower new export order growth."

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