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Euro-Zone PMI Revised Higher, but Signs of an Economic Downturn Continue

Benjamin Spier

THE TAKEAWAY: Euro-zone composite PMI for April revised higher -> Markit says ECB rate cut may not stop downturn -> Euro trading slightly higher

The Euro-zone composite PMI for output has returned to rising in April, following two months of declining index results, according to Markit.

The composite Producing Managers’ Index was revised higher to 46.9 for April, following a previous estimate that the PMI remained unchanged at 46.5. The Services PMI was also revised higher from a previous estimate of 46.6 to 46.9. A PMI below 50.0 indicates decline in sector activity, and the composite PMI has remained below 50.0 since January of 2012.

The German composite PMI also slipped below 50.0 in April for the first time since November 2012, the output index was reported at 49.2. Italy, France, and Spain also reported composite PMI’s below 50.0, but Italy’s 46.6 index result set a 19-month high. Job losses were reported for the sixteenth straight month, according to Markit.

Markit believes that the Euro-zone recession continued into the first quarter of 2013, even though the official GDP has yet to be released. Markit further says the economic downturn is likely to be gaining momentum in the second quarter. “The ECB has responded to the crisis by cutting interest rates to their lowest ever, but it seems difficult to believe that a mere 25 basis point cut from an already low level will have a material impact on an economy that is contracting so sharply,” said Markit Chief Economist Chris Williamson.

The Euro rose slightly above 1.3100 against the US Dollar as the Euro-zone countries’ PMI’s were being released, but most of the gains were short lived. EUR/USD may now see resistance by a 2-month high recently set at 1.3242, and support may be provided by the key 1.3000 figure.

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EURUSDDaily: May 06, 2013

Euro-Zone_PMI_Revised_Higher_but_Signs_of_an_Economic_Downturn_Continue_body_eurusd_daily_chart.png, Euro-Zone PMI Revised Higher, but Signs of an Economic Downturn Continue

Chart created by Benjamin Spier using Marketscope 2.0

-- Written by Benjamin Spier, DailyFX Research. Feedback can be sent to bbspier@fxcm.com .

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