02 February 2012 at 10:34 GMT
Yesterday saw a bunch of European PMIs released with most of them surprising to the upside in December and pointing to expansion (see
European PMIs). However, overall Eurozone PMI Manufacturing remains in the red at 48.8 though it increased from 46.9 at the end of 2011.
A simple model using PMI Manufacturing to predict GDP suggests a decline in Q4 '11 (GDP report out on February 15), but a return to stagnation from contraction in Q1 '12. While we suspect the model is too optimistic as it does not capture the drag from fiscal policy, it does serve as an illustration that we are not far away from growth. As we elaborate on in our
Quarterly Outlook 1Q'12 we predict flat growth for the Eurozone this year while consensus has drifted lower in the last couple of months to -0.5 percent (just last December it was -0.2 percent).
Tomorrow's Eurozone PMI Services (10:00 GMT) should provide a more complete view of the economy; it has held up well so far printing 50.5 in December after a (temporary?) trough in October at 46.4.
