Goldman Sachs published an analysis on Tuesday concluding that the March manufacturing purchasing managers' index readings for the Euro area and the United Kingdom came in weaker than expected. The bank's review found that the composite PMI figures missed consensus forecasts, with the Euro area coming in 0.5 points below expectations and the UK lagging by 1.8 points.
According to Goldman Sachs, the March PMI release is one of the first significant data points capturing economic conditions after the escalation period referenced in recent analysis. The firm highlighted two notable features of the surveys: a broad-based sharp increase in input prices across regions and a clear decline in the expectations components of the indices.
Goldman Sachs observed that this mix of rising input costs and falling expectations matches patterns seen in historical comparisons and tracks with other recent survey data. The firm also described the evolution of the PMI spot components over a longer span, noting that these spot measures showed resilience during the initial months following Russia's full-scale invasion of Ukraine in 2022, before weakening over the subsequent months of that year.
The analysis referenced the March ZEW survey as showing a deterioration in the six-month ahead expectations measure, while its spot conditions reading remained comparatively resilient. Goldman Sachs also said that, in prior months, forward-looking elements of the PMIs had improved, which the bank viewed as consistent with hopes for a cyclical upturn in Europe and for increased fiscal spending. German PMI readings, the firm added, remained at a firm pace in February.
On currency implications, Goldman Sachs stated that upward pressure on the euro versus the dollar would require spot activity data to catch up to the more optimistic expectations components. The firm said the logic works in reverse when interpreting how the energy shock affecting Europe is feeding through to activity measures.
Overall, Goldman Sachs' take on the March PMIs points to a near-term softening in activity signals, coupled with cost pressures and weakening forward-looking sentiment, factors the bank says are relevant for both economic outlooks and currency dynamics.