International Trading

EMU: manufacturing PMI falls back in August, but only moderately

In August, euro zone manufacturing PMI fell back after an unexpected improvement in July. The headline index dropped from 56.7 to 55.0, while only a slight decline (to 56.1) was expected. Both output and new orders weakened significantly, while employment stabilized. Services PMI on the contrary, surprised on the upside of expectations as the index fell only marginally (from 55.8 to 55.6). Services business expectations improved from 66.5 to 68.1. National details from France and Germany provided a mixed picture as German manufacturing PMI came out significantly weaker than expected, while services PMI rose to its highest level in three years. In France, manufacturing PMI surprised on the upside, while sentiment in the services sector came out weaker than expected. After a very strong second quarter, the recovery may slow somewhat in the second halve of the year, although growth is expected to remain on track. So, at least the August report doesn’t feed expectations that the EMU economy is following the US pronounced growth slowdown.
European Commission’s consumer confidence improved further in August, while an unchanged reading was expected. According to the advance estimate, consumer confidence improved from -14 to -11.7, the highest level since January 2008. Although the index is still significantly in negative territory, it is now slightly above the long term average (-12) and suggests domestic spending may play a bigger role in economic developments.

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