Whatâs Going On Here?A survey out late last week showed manufacturing activity in the eurozone is still contracting â but the rate of decline did slow in February. What Does This Mean?The uptick in manufacturing was mostly down to the easing of an extended slump in Germany â the eurozoneâs largest manufacturer and the country most affected by the goings-on in China. There was good news for the blocâs larger services sector â i.e. non-manufacturing jobs â too, which proved its own mettle with a six-month high. Between them, they're fueling optimism that the eurozone's recent economic weakness wonât descend into a full-blown recession.
In the UK, meanwhile, business activity continued to expand at much the same pace as in January. And after growth flatlined in the last three months of 2019, itâs those two back-to-back months of expansion that are raising investorsâ hopes of a newly re-energized British economy. Why Should I Care?The bigger picture: Spread like wildfire.
The pickup in activity in the eurozone and the UK is in sharp contrast to Asia, the region hit the hardest by the coronavirus outbreak. Key measures of business activity in Australia and Japan slumped, with data showing the worst deterioration in Japanese manufacturing activity in seven years. Investorsâ biggest fear now is that the downturn will spread elsewhere: some European carmakers, for example, have already been hit by supply chain problems. Thatâll add to the pressure on worldwide central banks to up support for their economies â but with global interest rates currently at historic lows, they might not be able to do much.
Zooming out: Bet the farm.
European carmakers got some more tough news last week: car sales in China have dropped 92% so far in February. Maybe those companies should start looking into the tractor business instead: Deere & Co, the worldâs largest agriculture equipment manufacturer, reported an unexpected jump in last quarter's profit, as American farmers splashed more cash following the US-China trade truce. | 