The trend indicator for the purchasing managers in the Eurozone has fallen for the second consecutive time. The composite index, which aggregates sentiment for the entire EMU private sector, fell by -0.5 points to 55.8 points in July. Even so, there is no doubt that the index remains at a high level.
The slight decline is probably partly due to concerns about a possible strain on the export industry caused by the stronger Euro. Even though the single currency is still not trading at a high level historically, the recent rapid appreciation of the Euro-Dollar exchange rate increases the cost of exporting goods and services, and could therefore make international sales difficult.
The economic trend in the Eurozone remains extremely good overall at the start of the third quarter of 2017. The purchasing managers’ indices, as well as other important leading indicators, had soared to dizzying heights in some cases in the preceding months. The economic growth trend in the Eurozone has gradually improved and consolidated further. Nonetheless, the real growth rates have up to now not wholly reflected the exuberant economic confidence. In this respect, a slowdown of the overheated economic optimism fits very well into the picture.
A similar picture to that in the Eurozone as a whole also emerges for Germany. Although the composite index for the entire private sector eased by -1.3 points to 55.1 in July, the trend barometer is still clearly in expansionary territory above the 50 point mark. The business and order situation was not quite as strong as in previous months. By contrast, the job prospects improved in July, especially in the services sector.
In France, the composite index eased by -0.9 points to 55.7. The index therefore also remains clearly above the expansion threshold of 50 points, the level which signals positive economic growth. The Macron factor obviously continues to persist here. After consumer sentiment had soared to an all-time high according to the GfK, the purchasing managers’ prospects for jobs growth in the manufacturing sector followed suit and shot up to a 17-year high. This can be seen as a positive signal for French domestic demand. Rising output and an improved order situation are also fuelling optimism for macro-economic development in the months ahead.