Positive surprise in UK, Europe with mixed figures. The pound is getting more expensive

The series of releases of preliminary PMI indices is behind us. Europe has a divided picture between industry, which is not improving, and services, which look more solid - viewed through the lens of today's readings. It seems that only in Great Britain positive surprise came from two sectors.

Good data from Great Britain

Wskaźnik S&P Global/CIPS UK Services PMI rose in February 2023 to 53,3 from 48,7 in January, an eight-month high, and beat market expectations of 49,2, according to preliminary estimates. Service providers experienced a particularly strong rise in business activity in February, which contrasted with marginal declines in each of the previous four months. Many respondents commented on the stronger demand for business services as the global economic outlook improved and domestic political uncertainty decreased. However, there have also been reports of continued cuts in consumer spending due to cost-of-living issues and higher borrowing costs.

On the other hand, in industry, although the PMI is still below 50, it seems to be on the rise. The UK manufacturing PMI rose to 2023 in February 49,2 from 47 in January, beating market forecasts of 47,5. This is the highest reading in seven months, indicating further recovery in the manufacturing sector. Production volumes increased for the first time since June 2022, although the pace of expansion was only modest, driven by recovering customer demand and improving supply conditions. Reflecting this, the latest survey signaled the fastest improvement in supplier delivery times since June 2009. On the other hand, new orders declined slightly and export sales declined again. Manufacturing cost inflation has also slowed down.

This allowed the British pound to respond with a rapid rise to its highest level in a week. The GBP/USD exchange rate is thus testing around 1,21, rising by almost 0,5 percent today. As a result, the British currency is today the strongest of the world's major currencies. On the other hand, the situation on the stock exchanges slightly improved after the first reaction to weaker industrial data from Germany, France or the entire euro zone. German DAX index fell more than 1% at one point. Here, a bit of optimism may be added by the ZEW publication from Germany.

And slightly worse data from Europe

ZEW Economic Sentiment Index for Germany increased by 11,2 points from the previous month to +28,1 in February 2023, the highest level in a year and well above market expectations of +22,0. Investor sentiment improved for the fifth consecutive month, supported by higher earnings expectations in the energy and export oriented sectors as well as in the consumer parts of the economy. The banking sector sentiment index hit its highest level since 2004 as long-term interest rate expectations continued to rise. About 42,1 percent. of surveyed analysts predict an improvement in the economic situation in six months, while 43,9 percent. of them do not expect any changes, and 14,0 percent. expects deterioration. Meanwhile, the indicator measuring the current economic situation increased by 13,5 points to -45,1 points.