January’s Private Sector PMIs Support the EUR, while Weighing on the Boerses


January Prelim Private Sector PMIs

Following ECB President Lagarde’s caution on Thursday, there was plenty of interest in today’s stats.

France, Germany, and the Eurozone’s prelim private sector PMIs for January were in focus.

In recent months, manufacturing sector activity has been on the rise, largely thanks to Germany.

Service sector activity has continued to struggle, however, as a result of the COVID-19.

A reintroduction of containment measures and an extension to lockdown measures was expected to weigh on services.

This morning’s figures sounded the alarm bells ahead of 4th quarter GDP numbers France and Germany next week. It wasn’t long ago that the ECB had looked towards consumption to support an economic recovery. With trade tensions between the U.S and China likely to continue, service sector contribution has become all the more important to sustainable economic growth.


From France, the manufacturing PMI rose from 51.1 to a 6-month high 51.5 versus a forecasted decline to 50.5. The Services PMI fell from 49.1 to 46.5. Economists had forecast a decline to 48.5.

According to the January survey,

While the manufacturing sector expanded at a quicker pace, new export orders continued to decline across the private sector. New export orders have, in fact, fallen in each month since January 2020.

In spite of the decline in new orders, French firms increased staff numbers for the 1st time in almost a year.

As a result of service sector activity, the composite PMI fell from 49.5 to a 2-month low 47.0.


Germany’s manufacturing PMI fell from 58.3 to a 4-month low 57.0, versus a forecasted 57.5. The services sector also grew at a slower pace, with the PMI falling from 47.0 to a 2-month low 46.8. Economists had forecast a decline to 45.3, however.

According to the January survey,

  • German export business continued to rise thanks to another sharp increase in the international sales of manufactured goods.

  • Surveyed firms commented on stronger demand from both China and the U.S.

  • Employment levels were also on the rise as a result of a sharp increase in hiring across the services sector.

Germany’s composite PMI fell from 52.0 to a 7-month low 50.8. Economists had forecasted a decline to 50.3.

With both France and Germany’s composite PMIs in decline, the Eurozone’s composite PMI fell from 49.1 to a 2-month low 47.5. Economists had forecasted a decline to 47.6.

The manufacturing PMI fell from 55.2 to 54.7, with the services PMI falling from 46.4 to 45.0. Economists had forecast declines of 54.5 and 44.5 respectively.

According to the Markit’s prelim January Survey,

  • Eurozone business activity fell at an accelerated rate in January. A 3rd consecutive monthly decline was the most marked since November.

  • The rate of factory output growth weakened to the slowest since the recovery began.

  • Service sector output fell at the second fastest pace since May 2020.

  • Away from France and Germany, the rest of the Eurozone saw an even steeper rate of decline.

  • In spite of the COVID-19 pandemic, Eurozone factory output expanded for a 7th consecutive month.

  • New orders, exports, and backlogs of work supported the manufacturing sector.

  • Service sector business activity fell for a 5th consecutive month, however.

  • New business inflows into the service sector fell for a 6-month in a row.

  • January also saw employment across the Eurozone fall for an 11th consecutive month.

  • Business expectations about output in the coming 12-months pulled back from December’s recent peak.

Market Impact

The EUR had slipped from $ 1.216 levels to a morning low $ 1.21516 upon release of the French PMIs.

Better than expected service PMI figures from Germany and a modest fall in the manufacturing PMI eased the pain, however.

The Eurozone’s better than expected manufacturing and services PMI also delivered support.

In response to Germany and the Eurozone’s PMIs, the EUR struck a current day high $ 1.21896 before easing back.

With private sector activity seeing slower growth at the start of the year, we can expect greater sensitivity to COVID-19 news.

Key areas of focus will remain vaccination rates and daily infection rates. Any threat of further extensions to existing containment measures would bring the ECB’s base rate growth forecasts into question.

For the European Boerses, the PMIs from France and Germany failed to provide support, however.

At the time of writing, the CAC40 was down by 0.80%, with the DAX30 and EuroStoxx600 down by 0.72% and by 0.65% respectively. The trio had seen more modest loses ahead of the January PMIs.

This article was originally posted on FX Empire