00:00So what for you as you pass this data are the main takeaways?
00:04The main takeaway is that this is hitting Europe a lot more strongly than anyone had feared.
00:11We saw this last week already when we got the new IMF numbers, the new IMF forecasts
00:15with the downgrades to Europe really were quite considerable.
00:19Now with France, we were expecting those numbers today to be below that 50 level that in PMIs
00:24is so important, below 50 is contraction, above 50 is growth.
00:28Germany here had been expected to have readings above 50 and now both the services number
00:34and the composite number are clearly below 50, are clearly in contraction and that is
00:41very bad news for the German government which as we know just downgraded, just halved its
00:46economic forecast for this year to just 0.5% yesterday.
00:50So if you're Christine Lagarde and you're looking at these numbers, what do you make of them?
00:55You have an inflation mandate, but this looks like weak, weak growth.
01:01Yes, it does look like weak, weak growth.
01:03At the same time, these aren't hard data.
01:05These are soft data.
01:06These are based on surveys.
01:07And we had Philip Blaine speaking both last week at the IMF and just yesterday in Frankfurt
01:13saying the people answering these surveys, the purchasing managers in this case, have the
01:20same information that we have.
01:22There's so much uncertainty about what's happening in the Middle East, about the Strait of Hormuz,
01:26how long that will be closed, what will be happening there.
01:29So they have as many questions as we do.
01:33So while they can give you a smart impression, it really, with things changing day to day,
01:39we need to wait for more hard data.
01:41And that means next week's rate decision, we've had indication now from most all policymakers,
01:46will be a hold because policymakers just don't know yet how hard this situation will be.
01:52Yes, absolutely, with the Strait of Hormuz still practically closed, with these two interlocking
01:56or overlapping blockades then, Zoe, in place.
01:59What's interesting also from the data is, yes, the manufacturing side has shown a little
02:03bit of weakness or at least coming down, but it isn't really where the action is.
02:07It's the services side in both Germany and in France, where we're seeing quite a lot of
02:11weakness, certainly in Germany at 46.9, well below the estimate as well and well below
02:17the previous reading.
02:17I mean, what do you think is explaining the way that this is getting into the services sector?
02:23We know for France that the reason that the services number was so weak is because people
02:29are not willing to spend.
02:30That makes sense.
02:31If we don't know how the economy is developing, we as consumers don't want to go out and spend
02:37our money because things might get tighter.
02:39We'd rather keep our savings.
02:41So pulling back from services is a real problem.
02:45It is quite interesting, though.
02:46As you've noted, manufacturing has been the weak point for years in Europe.
02:50And now this reversal with actually services being the point of weakness is quite problematic.
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